Happy Tuesday, GoldBuzzers!

It was a volatile start to the trading week as the U.S. made its boldest move yet to break Iran's grip on the Strait of Hormuz. Gold and silver both sold off on Monday, but the reasons matter more than the numbers. I'll walk you through what happened, what the data is telling us, and why the central bank buying trend still deserves your attention

Let’s get into it. ⬇️

Gold slipped to $4,523 on Monday, as investors weighed a fresh round of chaos in the Strait of Hormuz. President Trump launched "Project Freedom" to escort stranded ships through the waterway, and the U.S. Navy wasted no time - sinking six Iranian small boats that targeted civilian vessels under American protection. Iran's Fars News Agency claimed two missiles struck a U.S. Navy frigate, but CENTCOM flatly denied it, confirming no American ships were hit. Two commercial vessels were less fortunate: a tanker took projectiles near Fujairah and a bulk carrier was attacked by small craft near Sirik, both within hours of each other.

The conflict, now ten weeks old, continues to strangle energy markets and feed inflation fears. Last week's ISM Prices Paid index jumped to 84.6 - its highest reading since April 2022 - driven by surging oil and diesel costs tied directly to the war. That kind of input cost pressure makes it very hard for central banks to cut rates, and gold has paid the price, falling roughly 13% since hostilities began in late February.

Silver took a harder hit on the day, dropping over 3% to around $72.74. The bright spot? World Gold Council data showed central banks again added to their gold reserves in Q1, a reminder that the longer-term accumulation trend remains firmly in place.

Yesterday afternoon, President Trump posted an AI-generated image to Truth Social showing Jerome Powell falling into a dumpster. "'Too Late' is a DISASTER for America! Interest Rates too high!" read the caption.

It's the latest entry in a public pressure campaign that didn't end when Powell wrapped what was almost certainly his final FOMC meeting as Chair last Wednesday, and won't end when his term as Chair officially expires on May 15.

Because Powell isn't actually leaving on May 15.

That was the surprise out of last week's meeting. Rates held at 3.5 to 3.75 percent for a third straight time. The vote on the rate itself was 11 to 1, with Stephen Miran the lone dissenter for a cut. But on the policy statement language, three more officials broke ranks. Hammack, Kashkari and Logan refused to sign on to wording that hinted at future easing. Four dissents at one meeting. The most since 1992.

In the press conference, Powell announced he is staying on the Board of Governors after his Chair term ends, "for a period of time to be determined." His Governor seat runs through January 2028. The last Fed Chair to do this was Marriner Eccles in 1948.

Trump has nominated Kevin Warsh as the next Chair, and Senate confirmation is expected before May 15. So Warsh runs the meetings. But Powell still has a vote, and his presence denies Trump the chance to fill another seat on a seven-member board. Treasury Secretary Bessent called the move a "violation of all Federal Reserve norms."

That is the political theatre. The macro reality is what matters for our asset class.

Why the metals market noticed

The Fed is in transition. Inflation is running at 3.3 percent year over year. Gas prices spiked 21 percent in March alone on the back of the Iran conflict, now in its tenth week. Markets are pricing in zero rate cuts for the rest of 2026, with the first cut not expected until late 2027. That is a long way from where the easing narrative stood at the start of the year.

For gold, the calculation has two sides. Higher-for-longer rates raise the opportunity cost of holding a non-yielding asset. That is the bearish case, and it has weight. But two factors run the other way.

First, inflation is not behaving the way the Fed projected. Energy is the proximate driver, and oil keeps testing $100 a barrel as long as the Strait of Hormuz remains contested. Trump's "Project Freedom" initiative announced over the weekend is meant to escort civilian shipping through the strait. Gold and silver both opened lower Monday on the de-escalation hope, with gold around $4,564 and silver around $73. That dip reflects optimism about Iran, not a change in the underlying setup.

Second, central bank buying has not slowed. World Gold Council Q1 data showed continued accumulation, with emerging market central banks leading the way. That demand floor existed before the Powell drama and will exist after it. The bull market in gold isn't being driven by Fed politics. It is being driven by sovereign portfolio rebalancing and inflation that won't sit down.

The honest read

I want to sound a note of caution here. The Powell extension is not, by itself, a reason to expect higher gold prices imminently. The metals sold off Friday and again on Monday. They can drift sideways or correct further if Iran tensions ease and oil pulls back.

What the Powell move does is add another layer of uncertainty to a Fed that is already split four ways on its own policy direction. Warsh has signalled he wants to cut. The hawks won't let him. Powell will be sitting in the room with a vote. None of that resolves cleanly. Markets dislike unresolved.

For longer-term holders, the bigger picture hasn’t shifted a bit. Central banks keep buying gold at a record pace. Inflation isn't returning to 2 percent anytime soon. And the Fed is now in leadership transition with no consensus on which way to move. That mix has supported gold through every major bull cycle since the 1970s.

For traders, the next few weeks will be highly significant. Watch Warsh's confirmation vote first. His first FOMC meeting in June will signal whether he can build any consensus for cuts. The Iran situation remains the wild card on the energy side.

The bull market isn't broken. But it's digesting.

That’s all for this Tuesday, folks. I’ll see you on Thursday.

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Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com