Forex Advisory

Gold prices have been extremely volatile this week as two major forces influence the market: the escalating military conflict in the Middle East and a series of crucial U.S. economic reports that could affect the interest-rate decisions of the Federal Reserve for the rest of the year. Following joint military strikes by the United States and Israel on Iran—which reportedly killed Iranian Supreme Leader Ali Khamenei and targeted nuclear and military facilities—gold surged to a record high of $5,594.82 on January 29. Since then, prices have fluctuated sharply. This week alone, spot gold rose above $5,400 on Monday, dropped nearly 4% on Tuesday, then recovered with gains of 1.6% on Wednesday and another 0.8% on Thursday, pushing April futures close to $5,186. Meanwhile, tensions around the Strait of Hormuz—a critical route carrying about 20% of the world’s oil supply—have increased fears of an energy shock. Such a disruption could raise inflation while slowing global growth, conditions that typically favor gold. Analysts at J.P. Morgan remain optimistic about gold’s outlook, predicting prices could reach $6,300 by the end of the year. Their forecast is based on persistent geopolitical risks, continued gold purchases by central banks, and strong investment demand. The World Gold Council reported that central banks bought a net 230 tonnes of gold in the fourth quarter of 2025, while gold ETFs attracted $18.7 billion in inflows in January alone. According to Peter Grant of Zaner Metals, the ongoing conflict with Iran will likely keep supporting gold prices, though volatility is expected to remain high until tensions ease. However, the sharp price drop on Tuesday highlighted the competing forces affecting gold. Rising oil prices are fueling inflation concerns, which push bond yields higher and strengthen the U.S. dollar. A stronger dollar—another safe-haven asset—makes gold more expensive for buyers using other currencies, limiting how much prices can rise. Markets currently expect the Federal Reserve to keep interest rates unchanged at its March 17–18 meeting. In the near term, several key events could influence gold prices. The February non-farm payrolls report will indicate how rising energy costs are affecting employment. This will be followed by the February Consumer Price Index (CPI) report on March 11. Since the Bureau of Economic Analysis has delayed the release of the PCE inflation data until April 9, these employment and CPI reports will carry greater significance for the Fed’s upcoming policy decision. Adding to the uncertainty, U.S. President Donald Trump has nominated former Fed Governor Kevin Warsh as the next Fed chair, which has strengthened expectations of a more rate-cut-friendly central bank in the future—an environment that generally supports gold prices. From a technical perspective, gold’s trend still appears positive. The metal is trading above both its 50-day and 200-day moving averages, and recent pullbacks have attracted buyers. Important support lies near $5,160, while a sustained move above $5,298 could open the way for another test of the record high. Overall, analysts expect continued volatility leading up to the Fed meeting, but geopolitical tensions are likely to provide a strong underlying support for prices. Although stronger-than-expected inflation or employment data could temporarily push gold lower by delaying potential rate cuts, the broader factors—war risks, ongoing central-bank purchases, and gradual diversification away from the U.S. dollar—suggest that significant price dips may continue to attract buyers.