As of the close of trading on April 20, 2026, the gold market is experiencing an intriguing “divergence”: geopolitical tensions are reigniting, yet gold prices are under pressure and falling. On Monday, following news that the U.S. Navy had seized an Iranian vessel in the Strait of Hormuz and that the ceasefire agreement was on the verge of collapse, international oil prices surged more than 5%.
However, gold, a traditional safe-haven asset, unexpectedly slipped 0.5% to close at $4,804.44 per ounce, hitting a one-week low. At the same time, the U.S. dollar index and 10-year Treasury yields both moved higher, reflecting the market pricing in of inflationary risks from a prolonged oil shock.
Short-term challenges: Why has gold’s “safe-haven halo” temporarily failed?
Rodolphe Bohn, FX and Commodities Strategist at HSBC, pointed out that gold does not always act as a straightforward “geopolitical hedge” in every risk event. In the current escalation of the Middle East conflict, the market has preferentially chosen the U.S. dollar as a safe haven, and investors have even sold gold to raise liquidity, causing gold and oil prices to move in opposite directions for a time.
The short-term pressures on gold are clearly visible: first is the strong U.S. dollar. Following the U.S. Navy’s action, the dollar absorbed a large amount of safe-haven demand, directly weighing on dollar-denominated gold. Second, although the Federal Reserve is likely to keep interest rates unchanged through 2026–2027, long-end yields are rising along with inflation expectations, increasing the opportunity cost of holding zero-yield gold. Third, on liquidity, if the situation further deteriorates, institutions may continue to sell gold for cash, repeating the scenario from March when gold prices plunged from $5,415 to $4,400.
In addition, high gold prices have begun to reshape physical supply and demand dynamics: jewelry demand has been severely hit, coin demand remains weak, while mine output and recycling are expected to rise modestly. If investment demand remains sluggish for an extended period, the additional supply could cap any price rebound.
Medium-to-long-term opportunities: three pillars build a solid foundation
Despite short-term volatility, HSBC maintains a “bullish” view on gold over the medium-to-long term. Three structural forces will support the upward movement of gold prices:
- Fiscal deficits and out-of-control debt
The U.S. debt-to-GDP ratio approached 100% in 2025, and rising global defense spending is further adding to debt burdens. Investor concerns over fiscal sustainability and policy flexibility will continue to drive demand for hard assets (gold). - Stagflation risks become the “new normal”
Even without the help of rate cuts, the combination of stubborn inflation and growth threats is precisely the most favorable macro environment for gold. High oil prices erode consumption and corporate profits, while the Fed is unable to ease policy. Stagflation fears will continuously drive capital into gold. - The long-term logic of central bank buying remains unchanged
Although some central banks sold gold in early 2026 to defend foreign exchange reserves amid soaring energy import bills, HSBC expects central bank demand to improve significantly in the second half of the year as long-term diversification policies reassert themselves.
Key variable ahead: Will the ceasefire truly hold?
The short-term direction of gold prices depends on the actual evolution of the Middle East situation. HSBC believes that if the Strait of Hormuz is formally reopened and oil prices stabilize at lower levels, it would reduce financial stress, ease inflation fears, and support lower yields — which would actually be beneficial for gold. Conversely, if the conflict expands and the waterway remains blocked, gold prices, after an initial dollar squeeze, may eventually resume their upward trajectory as inflation spirals out of control. In the period ahead, investors will need to endure the disturbances of a strong dollar and high yields, but the deep-seated trends of fiscal deficit monetization, the stagflation spiral, and de-dollarization of reserves have built a hard-to-reverse long-term floor under gold prices. This pullback in April 2026 may well be a window to position for medium-to-long-term opportunities.