After weeks of sustained pressure, the gold market is finally showing tentative signs of life. The precious metal recently posted its first weekly gain since the outbreak of the Iran conflict in late February. This uptick has been fueled by bargain hunters entering the market following its steepest decline since 2013, with prices currently hovering near $4,490 per ounce.
The Unconventional War Impact: A Burden, Not a Boost
Recent price action has confounded many investors. Since the onset of the Iran war, gold has shed nearly 15 percent of its value—a worse performance than during any other conflict in the past half-century. This anomaly stems from an unusual market mechanism. Disruption in the Strait of Hormuz pushed oil prices above $100 per barrel, triggering sustained demand for U.S. dollars from energy-importing emerging economies. The resultant dollar strength exerted downward pressure on the very currencies whose holders are traditionally among gold’s most reliable buyers, effectively turning them into sellers.
Central Bank Policy: The Stalled Pivot
The primary macroeconomic driver remains the interest rate trajectory set by the U.S. Federal Reserve. At the start of the year, financial markets had priced in three rate cuts for 2026. Today, the CME FedWatch tool indicates expectations for zero cuts. During its latest meeting on March 18, the Fed held its benchmark rate steady at 3.5 to 3.75 percent. Elevated energy prices resulting from the ongoing conflict are adding to inflationary pressures, making any imminent monetary policy easing increasingly unlikely.
All eyes are now on Fed Chair Jerome Powell, who is scheduled to speak this evening. His tone is expected to have an immediate impact on gold: any hawkish signals would likely bolster the dollar and could swiftly halt the metal’s nascent recovery.
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Additional Pressure from Official Sales
Russia is contributing additional downward pressure on the market. According to the World Gold Council, Moscow offloaded approximately 15 tonnes of gold from its reserves in just the first two months of this year—the largest two-month reduction since 2002. Intelligence reports from Ukraine suggest Russia plans to liquidate nearly $19 billion from its gold and precious metals reserves by the first half of 2026. Holdings in the National Welfare Fund have dwindled from over 550 tonnes in 2022 to roughly 160 tonnes. However, the direct effect on global benchmark prices remains contained, as these transactions largely occur outside established exchanges and, due to Western sanctions, are primarily directed toward Asian and Middle Eastern markets.
Institutional Optimism Amid Uncertainty
Despite the challenging environment, several major institutions maintain a bullish long-term outlook. In the latest weekly Kitco survey, 50 percent of Wall Street analysts polled forecast higher prices for the current week, with only 19 percent anticipating a decline. J.P. Morgan is holding firm to a price target of $6,300 per ounce by the end of 2026, while Deutsche Bank cites a target of $6,000.
The sustainability of the current rebound hinges critically on central banks’ next moves. The key question is whether these institutions will return to the market as sellers if inflation persists, or whether the inflationary impulse from higher energy prices will ultimately reassert gold’s traditional role as an inflation hedge.
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