Gold Prices Dip to Two-Month Low Amid Market Uncertainty
A gold bar weighing 1000 grams is being showcased at the Austrian Gold and Silver Refinery in Vienna. This was highlighted on February 3, 2026.
On Thursday, gold prices dropped to their lowest point in two months, driven by mounting uncertainty related to the ongoing conflict between the United States and Iran. This situation strengthened the dollar and lifted oil prices as well.
As of 3:43 a.m. ET, spot gold was trading around 1.6% lower at $4,385.85 per ounce, while gold futures declined 1.3%, settling at $4,389.70.
This decline brought spot prices down to levels not seen since March 26. The sell-off in gold could be attributed to the stronger US dollar, which has made gold priced in dollars costlier for international buyers.
Gold Price Outlook
Despite the downturn, UBS strategists maintained their optimistic outlook on gold. In a note, they suggested that although the Iran conflict has put pressure on gold prices—fueled by fears that high energy costs could lead to tighter monetary policies—the metal is likely to rebound as market expectations for interest rate hikes ease.
UBS recently lowered its year-end price target for gold to $5,500 per ounce, down from a previous estimate of $5,900. Mark Hefele, chief investment officer at UBS Global Wealth Management, expressed continued positivity about gold’s prospects, emphasizing that while short-term performance may hinge on developments in the US and Iran, the medium-term outlook is supported by various factors like central bank demand and rising global debt.
Meanwhile, Bank of America set its year-end gold price target at $5,093 an ounce, which is about 16% higher than the latest spot prices. Afterward, they predict that prices may slide back to around $4,925 by the end of 2027.
BofA analysts acknowledged that gold seems overbought but underinvested. They noted that recent corrections in prices have followed a drop in ETF buying activity. However, the broader economic environment, particularly unconventional US economic policies, remains favorable, leading to upside risks.
That said, the BofA team cautioned that a strong dollar, rising real interest rates, and increased supply could present challenges to their forecast.
Kepler Cheuvreux analysts indicated a growing interest in gold, pointing out its strong correlation with oil prices, which could play a role in future performance.
Interest Rates and Inflation Pressures
Michael Field, chief equity strategist at Morningstar, commented that the factors contributing to gold’s decline will take some time to resolve. He mentioned that investors are increasingly worried that the ongoing conflict in Iran will continue to drive inflation upward.
While gold and other precious metals are traditionally viewed as hedges against inflation, they don’t provide income. With interest rates anticipated to rise along with inflation, many investors are leaning towards assets that generate income instead.
Government bond yields in Europe, the US, and Japan saw a slight uptick as worries surrounding a possible resolution to the conflict reignited inflation concerns. The situation has been exacerbated by the closure of the Strait of Hormuz, a vital shipping lane, which has put upward pressure on crude oil prices.
Silver also faced a rough morning on Thursday, with spot prices dropping 2.4% to approximately $72.85 per ounce. It’s notable that both gold and silver reached new highs in 2025, with increases of 66% and 135%, respectively. However, 2026 is expected to bring even more volatility, highlighted by a significant drop in silver futures in late January—the worst single-day hit since the 1980s.
On the same day, palladium prices fell by 1.7%, trading at $1,884.95 per ounce, while another palladium measure was also down by 1.7% at $1,366.70.
ANZ’s senior commodity analyst noted that the recent sell-off in precious metals is largely due to renewed conflict in the Middle East, which clouds the outlook for interest rates and has strengthened the dollar.
They indicated that concerns surrounding the protraction of the conflict in the Middle East could prolong inflation and keep interest rates elevated. Despite potential peace deals, inflation worries are expected to persist, driven by factors like rising food costs and environmental challenges affecting agricultural production.
Later today, the US Consumer Expenditure Price Index for April—an important measure of inflation according to the Federal Reserve—will be released. Economists had predicted a 0.5% rise from the previous month and a 3.8% increase from a year prior.
