Gold tests its mettle

As of Wednesday, spot gold was up roughly 5% for the year, a little more than half of the S&P 500’s (SPX) return—a dramatic departure from 2025, when the yellow metal rallied more than four times as much as the SPX (66% vs. 16.4%).

But gold’s modest year-to-date gain obscures the market’s real trend so far this year. Although the 2025 rallied spilled over into January—pushing prices to new all-time highs and a 29.4% return for the month—as of Wednesday gold was down more than 16% from its January 28 record close.

The June gold futures contract (GCM6) shows the market’s volatile path this year, highlighted by two extremely sharp sell-offs. On Tuesday of this week prices dipped below the swing low they made earlier this month, although on Wednesday they bounced intraday to close above this short-term support threshold:

Given its status as a “safe-haven” asset in time of geopolitical or market disruption, gold’s recent sell-off amid conflict in the Middle East and surging oil prices seems counterintuitive. But as Morgan Stanley analysts noted in mid-April, gold can wears different financial hats at different times, alternately functioning as a “crisis hedge,” inflation hedge, or monetary hedge. While the analysts discuss multiple factors that have shaped gold’s recent performance (including the possibility that the previous rally was overextended), one stands out: Gold’s sensitivity to monetary policy has become its key driver since the Iran conflict started, overshadowing its other roles.

The analysts explain that gold doesn’t necessarily respond to the headline event, but to the policy response that follows that event. The Middle East conflict has created a global energy supply shock and the possibility of higher-for-longer oil prices and stickier inflation that could keep central banks (including the US Fed) from cutting interest rates, or even lead to rate hikes (although Morgan Stanley economists don’t anticipate the latter).¹ In short, gold weakness has been driven by concerns about the possibility of rising interest rates, which typically provide a challenging environment for the metal.

In terms of price action, a gold line chart (closing prices only) shows that June gold futures, after bouncing in early April, have fallen relatively close to a potential support level defined by the late-December and late-March lows:

The Morgan Stanley analysts see the potential for additional upside this year, with gold possibly rallying to $5,200 in the second half (down from a previous forecast of $5,700). However, they note ongoing conflict and continued disruption to the Strait of Hormuz could create an “far less supportive” environment.

In the near-term, gold’s looming support level—a breakdown of which would likely coincide with spot gold prices falling into negative territory for the year—could turn out to be an important technical test.

Market Mover Update: GE Vernova (GEV) successfully tested—at least for a day—a support level of its own on Wednesday, climbing more than 1% (see “Energy surges and sentiment slides”).

Today’s numbers include (all times ET): Housing Starts and Building Permits (8:30 a.m.), Jobless Claims (8:30 a.m.), Philadelphia Fed Manufacturing Index (8:30 a.m.), PMI Composite Flash (9:45 a.m.), EIA Natural Gas Report (10:30 a.m.).

Today’s earnings include: Advance Auto Parts (AAP), Deere & Co. (DE), Ralph Lauren (RL), Workday (WDAY), Walmart (WMT), Zoom Communications (ZM).

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¹ MorganStanley.com. Gold: Safe haven or Risk Asset? 4/17/26.