Key Takeaways:
Gold has been locked in a tight range near $4,450 per ounce for three weeks, unable to break higher despite an ongoing Middle East war that would typically fuel safe-haven demand.
The yellow metal fell almost 2 percent on Monday to a weekly low of $4,450 per ounce after the US launched another assault on Iranian military sites, according to spot market data. Three-month futures in New York held just above $4,500. The decline extended into Tuesday, with spot gold slipping to around $4,390, according to Benzinga data.
"The optimism surrounding negotiations between the US and Iran aimed at ending the standoff in the Strait of Hormuz faded over the weekend," Ricardo Evangelista, senior analyst at ActivTrades, said. "As a result, energy prices rebounded, reviving inflation concerns and reinforcing hawkish Federal Reserve expectations."
Brent crude traded at $104.40 per barrel on Tuesday, down from a four-year high of $126 on April 30 but still well above the $72 level before the strikes on Iran began. WTI crude spiked about 2 percent to $90.44 per barrel on Monday, according to market data. The ICE US Dollar Index edged up 0.1 percent, adding pressure on gold by making it more expensive for buyers using other currencies.
The paradox at the heart of gold's current stagnation is that the same conflict driving geopolitical uncertainty is also fueling inflation fears that push interest-rate expectations higher. Traders now price a 39 percent probability of a quarter-point Federal Reserve rate hike in December, according to CME Group's FedWatch tool. Gold, which offers no yield, typically suffers when rates rise because the opportunity cost of holding it increases relative to interest-bearing assets.
Why the safe-haven playbook stopped working
Gold surged 60 percent in 2025 and hit a record closing high near $5,600 per ounce in January 2026, driven by central bank purchases, US fiscal deficits, and reserve diversification trends. Since the Iran conflict escalated, however, the metal has traded sideways, gaining just 4.5 percent year to date.
This pattern mirrors historical behavior during geopolitical shocks. After the Russia-Ukraine conflict began in 2022, gold jumped 15 percent initially but then declined 15 to 18 percent as the Fed raised rates. The same dynamic played out during the Gulf War and Iraq War, when gold rose 17 percent and 19 percent respectively at the outset before retreating as tensions eased.
UBS commodity analyst Giovanni Staunovo said the underlying fundamentals remain supportive. "Over the medium term, we expect gold to move higher amid elevated global debt burdens, persistent fiscal deficits in the US, and continued reserve diversification trends," he wrote in a research note. The Swiss bank recently cut its year-end 2026 gold forecast to $5,500 per ounce from $5,900, citing headwinds from elevated Treasury yields and sustained dollar strength. Goldman Sachs maintained its $5,400 year-end target, citing "strong underlying interest in gold."
Cross-asset spillover and the commodity supercycle
The Iran war has boosted commodities across the complex, with the UBS CMCI Composite total returns index gaining more than 20 percent year to date in US dollar terms. Silver futures jumped 7.5 percent to $75.50 per ounce on Tuesday, while copper rose 2.7 percent to $5.64 per pound and platinum added 4.2 percent to $1,974.
Staunovo said oil product inventories are running low in various economies and could necessitate even higher prices to ration demand before stocks are refilled. He also projected further supply shortages for copper and aluminum, supported by structural drivers such as electrification.
For investors holding substantial gold positions with significant unrealized profits, UBS recommended broadening commodity exposure to include copper, aluminum, and agricultural assets to diversify sources of future return. The bank continues to favor commodities in 2026 with a focus on active management, noting that commodities have historically shown low correlation with equities and bonds.
The longer the US-Iran conflict drags on, the greater the risk of negative economic impacts that could eventually support hedging demand for gold. UBS analysts said a more neutral monetary policy backdrop in 2027 could weaken support for the dollar and improve investor appetite for the yellow metal once again.
This article is for informational purposes only and does not constitute investment advice.
