Gold Outlook

◆ Gold has pulled back amid liquidation following the strikes in Iran, alongside rising oil prices, a stronger US dollar, and higher bond yields.

◆ We expect gold to resume its rally once Middle East tensions ease, though the outlook will depend heavily on oil prices and the direction of the US dollar.

◆ We are raising our forecasts across the board in anticipation of a renewed rally, supported by fiscal excesses and broader macroeconomic risks.

Gold prices reached a record high of USD 5,450/oz on 30 January before retreating to a 2026 low of USD 4,405/oz on 23 March. The decline was driven by heavy liquidation as a combination of factors—including a stronger US dollar, rising yields, higher oil prices, and weaker equities—pressured the market.

We believe the broader bull market remains intact, but a sustained recovery will likely require an easing of hostilities with Iran, the formal reopening of the Strait of Hormuz, and a continued decline in oil prices. These developments could contribute to a weaker US dollar later in the year, in line with our FX Strategy team’s expectations, while also helping to ease yields and support equities. Together, these conditions would create a more favorable backdrop for gold.

At the same time, widening fiscal deficits in the US and other major economies continue to underpin investment demand for gold and are likely to remain an important long-term driver. In the near term, however, the market is expected to remain highly sensitive to geopolitical headlines. The recent ceasefire has already provided some support for prices.

Geopolitics, Central Banks, and Trade

Geopolitical risk was supporting gold even before the strikes in Iran. Longer term, continued shifts in the global political landscape—including changes in US foreign policy, strategic rivalry between the US and China, and ongoing conflict in the Middle East and elsewhere—should remain supportive for gold.

Central bank buying is moderating, and some countries may reduce holdings temporarily to preserve foreign exchange reserves amid rising energy import costs. Even so, we expect official sector demand to strengthen later in the year as reserve managers continue to pursue long-term diversification strategies. That said, purchases are likely to remain below the peaks seen in 2022–24 and may also fall short of 2025 levels.

Renewed trade tensions could also lend support to gold, although this theme is unlikely to be as powerful a driver as it was in 2025.

Supply and Demand Balance

Elevated gold prices are encouraging additional supply while weighing on physical demand. Mine output is expected to increase modestly in 2026–27 despite ongoing production constraints. Recycling activity has been less responsive to higher prices than anticipated, but we expect it to pick up more meaningfully over the same period.

Meanwhile, high prices are significantly reducing jewelry and coin demand in major consumer markets. Despite these shifts, the rally has so far remained resilient, even with the recent pullback. Still, softer physical demand and rising supply mean that a larger share of bullion will need to be absorbed by investors.

Although coin demand remains weak, demand for large bars is holding up better, supported by institutional interest and financial market deregulation in key consumer markets such as India and China.