Gold Just Had Its First Down Week in Five. Central Bank Super Week Could Decide What Comes Next

• Key Takeaways:
  
  Gold dropped below $4,700 after four consecutive weeks of gains, marking its first weekly decline since late March.
  The FOMC (April 28-29) and ECB (April 30) meet in the same week while the Strait of Hormuz remains effectively closed.
  US CPI jumped to 3.3% year-over-year in March, driven by war-related energy costs, keeping the Fed locked at 3.50-3.75%
  Corrective pullbacks during strong trends often retrace 23.6-38.2% of the prior move before the dominant direction reasserts itself.
  The S&P 500 closing above 7,000 for the first time signals risk appetite is returning, which could limit gold's safe-haven bid short-term

Gold traded near $4,700 this week after touching $4,800 the week before. Four straight weeks of gains, then a pause. If you have been watching this rally since March, the obvious question is whether this pullback is a healthy correction or the start of something larger.

We think the answer depends heavily on what happens in the next 72 hours. Two of the world's most influential central banks are meeting, oil is still elevated from the Hormuz blockade, and US inflation data has shifted the entire rate outlook. This is one of those weeks where macro forces can reshape wave structures across multiple asset classes.

The Macro Picture: Why This Week Matters More Than Most

Three things are colliding at once.

First, the Fed meets on April 28-29. Markets are pricing a 99.9% probability of a hold at 3.50-3.75%. That part is settled. What is not settled is the tone. March CPI came in at 3.3% year-over-year, up from 2.4% in February. That is a sharp move, and most of it traces back to energy costs driven by the Hormuz crisis. Fed Chair Powell is in his final weeks before Kevin Warsh takes over on May 15. His press conference could signal whether the Fed views this inflation spike as transitory or structural.

Second, the ECB meets on April 30. The European Central Bank is expected to hold at 2.15%, but the inflation picture in Europe is deteriorating. Core inflation remains above 3%, oil imports through the Strait have been disrupted for nine weeks, and ECB President Lagarde recently described the current environment as a "layer cake of shocks." Markets are now pricing a summer rate hike as increasingly likely.

Third, the Strait of Hormuz is still effectively closed. Despite the ceasefire agreed on April 8, daily vessel traffic has dropped from 130+ ships to roughly nine. Goldman Sachs raised its Q4 Brent forecast to $90 per barrel on the assumption that Gulf exports will not normalize until late June. Oil prices are holding near $100-105 per barrel, which continues to feed through to consumer prices globally.

These three factors create a feedback loop. Higher oil keeps inflation elevated. Elevated inflation keeps central banks hawkish. Hawkish central banks pressure gold through higher real yields. But at the same time, geopolitical uncertainty and inflation hedging support gold demand. This tension is exactly what produces the kind of corrective structures we study in wave analysis.

Gold's Four-Week Rally: What Drove It

Gold rallied from roughly $4,500 in late March to above $4,800 by mid-April. The move was driven by three catalysts:

1. War premium expansion. The Hormuz blockade created the largest energy supply shock since the 1970s, according to the IEA. Gold responded as both an inflation hedge and a safe-haven asset.

2. Dollar weakness. The DXY fell from above 100 in early April to 98.27 by April 17 and sits near 98.5 today. A weaker dollar mechanically supports gold prices.

3. Central bank buying. Institutional demand from central banks, particularly in Asia, has remained a structural bid underneath the market throughout 2026.

The pullback from $4,800 to $4,700 represents roughly a 2% decline. In the context of a 6-7% rally, that is a shallow retracement. In wave analysis terms, shallow corrections within a strong trend typically retrace between 23.6% and 38.2% of the prior move. A correction that holds above the 38.2% level often signals that the underlying momentum remains intact.

What Could Change the Picture

There are two scenarios that could turn this correction into something deeper.

Scenario 1: A hawkish surprise from Powell. If the FOMC statement or press conference signals that the Fed is seriously considering rate hikes to combat oil-driven inflation, real yields would rise and gold would face genuine selling pressure. The probability of this is low given Powell's lame-duck status, but the market would react sharply if it happened.

Scenario 2: A Hormuz breakthrough. If ceasefire negotiations produce a credible agreement to reopen the Strait before the April 22 deadline extension expires, oil would drop, inflation expectations would ease, and gold's war premium would deflate quickly. The White House confirmed on April 27 that Trump is reviewing Iran's latest proposal. Any progress this week could trigger a fast unwinding of the risk premium baked into gold.

On the other side, if both central banks maintain their current stance and Hormuz remains blocked, gold is likely to find support near current levels and resume its upward path. The structural drivers (inflation hedging, dollar weakness, central bank demand) remain intact.

The Broader Market Context

It is worth noting what is happening outside of gold.

The S&P 500 closed above 7,000 for the first time in history last week and continues to push higher. AI-related stocks now represent 45% of the index's market capitalization, and the rally is driven by earnings growth rather than pure speculation. This tells us that risk appetite is not broken. Investors are simultaneously hedging with gold and buying equities. That dual positioning suggests the market is not pricing a recession or a financial crisis. It is pricing a supply shock with contained financial contagion.

Bitcoin has rallied to $77,200, up from $66,900 in early April. The "digital gold" narrative is getting traction again as crypto benefits from both inflation hedging flows and the broader risk-on sentiment driven by AI optimism.

The DXY sitting near 98.5 is significant. If the dollar breaks below 98 on a dovish Fed, that would be another tailwind for gold. If the dollar bounces back above 99 on hawkish rhetoric, gold could see deeper corrective pressure.

What We Are Watching at EWS

We are focused on three things this week:

Gold's reaction to the FOMC statement on Wednesday. The initial move matters less than the follow-through. We want to see whether buyers step in on any dip or whether the correction extends. The wave structure at the current level will tell us a lot about whether the next leg is up or sideways.

The DXY at 98. This is a level that has acted as both support and resistance over the past month. A clean break below could accelerate dollar weakness and support gold. A bounce here would suggest the correction has more room to develop.

Hormuz headlines over the weekend. The ceasefire extension negotiations are the single largest binary risk for oil, gold, and forex markets right now. Any resolution would reshape wave counts across multiple instruments.

The Bottom Line

Gold pulling back 2% after a four-week rally is normal behavior. Corrections within strong trends are how markets digest gains and build the foundation for the next move. The question is not whether gold corrected. It is whether the correction is complete.

This week's central bank decisions and Hormuz developments will provide the answer. We are not in the business of guessing headlines. We watch structure, measure proportions, and wait for confirmation. That discipline is what separates reactive trading from strategic positioning.

The wave count will tell us when the correction is done. Until then, patience is the only edge that matters.

This article reflects the views of the EWS Research Team and is for educational purposes only. It does not constitute financial advice. Always conduct your own research before making trading decisions.