Gold and silver prices have retreated over the past two weeks as shifting interest-rate expectations and rising global demand for U.S. dollar liquidity put pressure on precious metals, despite ongoing geopolitical tensions.
Gold fell for the second consecutive week, testing support above $5,000 per ounce. Spot gold was trading around $5,021 per ounce, down roughly 3% from last week’s close. Silver moved in the same direction, testing support near $81 per ounce and trading at $81.04, down about 4% for the week.
Although escalating geopolitical tensions in the Middle East would typically support demand for safe-haven assets, the performance of gold and silver has fallen short of some investors’ expectations.
The recent pullback in gold may be frustrating for investors, but it is consistent with broader shifts in global financial markets. The joint war by the United States and Israel against Iran has created exceptional demand for U.S. dollar liquidity, prompting investors to favor holding the dollar as the world’s primary reserve currency.
While the gold market is generally highly liquid, the physical gold market can face liquidity shortages during periods of acute economic stress, pushing investors toward assets with even greater liquidity.
Meanwhile, the rise in U.S. government bond yields back above 4% reflects weaker demand for safe-haven assets in the short term. However, analysts expect demand for gold to return once the intense search for liquidity subsides.
The current environment can be described as a “liquidity-demand phase” during crises, making the short-term outlook for precious metals more cautious, with prices likely to stabilize temporarily before potentially resuming their upward trend.
At the same time, the U.S. dollar is benefiting from shifting monetary policy expectations ahead of the Federal Reserve’s policy meeting scheduled for next week.
The war with Iran has caused significant disruptions to global supply chains, pushing energy prices—particularly oil—sharply higher. This increase has raised concerns about renewed inflationary pressures in the United States, which could prompt the Federal Reserve to maintain tighter monetary policy for longer than previously expected.
In a research note, analysts at BMO Capital Markets said they now expect the Federal Reserve to cut interest rates only twice this year, with the first cut likely in September, compared with earlier expectations for three cuts beginning in June.
The analysts added that rising oil prices driven by the conflict with Iran are increasing the risk of stagflation, particularly as job growth slows while inflation remains elevated.
Rising inflation risks give the Federal Reserve justification not to rush into cutting interest rates. While geopolitical factors are often amplified in monetary policy debates, oil prices are a variable the central bank cannot ignore—especially if they remain above $100 per barrel, as this would directly affect U.S. fuel prices and fuel inflation.
Gold testing support near $5,000 ahead of the Federal Reserve meeting is therefore not surprising, as short-term risks still appear tilted to the downside.
Markets are currently pricing in roughly an 80% probability of only one rate cut in 2026, with oil prices remaining elevated. This strengthens the U.S. dollar and adds pressure on gold.
In the near term, gold’s movement will remain closely tied to the performance of the U.S. dollar and the outcome of the upcoming Federal Reserve meeting, while medium- and long-term trends will likely depend on the path of monetary policy over the coming year.
Ole Hansen, head of commodity strategy at Saxo Bank, said that gold still has long-term upside potential, noting that the war could push inflation higher while simultaneously weighing on economic growth.
He added that the Federal Reserve may find itself in a difficult position if economic growth slows while inflation rises at the same time, as cutting rates in an inflationary environment could push long-term bond yields higher and increase market volatility.
Hansen also noted that central-bank demand for gold may slow temporarily, but concerns about rising government debt, geopolitical tensions, and declining confidence in fiat currencies will remain supportive factors for gold in the long term.
Gold remains within a long-term bullish trend despite recent selling pressure. Continued government deficit spending and the expansion of central-bank balance sheets support gold’s role as a key hedge, particularly as there are no clear solutions to reduce sovereign debt levels in major economies.
A busy week of central-bank meetings
Markets are now turning their attention to a series of global central-bank meetings scheduled for next week, led by the Federal Reserve’s monetary policy decision.
The week will begin with a meeting of the Reserve Bank of Australia, with expectations of a modest rate hike as inflationary pressures persist.
The Bank of Canada will announce its policy decision on Wednesday, ahead of the Federal Reserve’s announcement, while the Bank of Japan will hold its meeting on the same day.
On Thursday, monetary policy decisions are expected from the Swiss National Bank, the Bank of England, and the European Central Bank, with forecasts suggesting no major changes in policy.
Markets will also watch several key U.S. economic data releases, including housing market data and regional manufacturing surveys, which could provide additional signals about the trajectory of the U.S. economy and inflation in the coming period.
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