Gold prices slide despite Middle East war

Gold prices declined on Thursday as a stronger U.S. dollar and shifting interest‑rate expectations weighed on the metal, even as the war in the Middle East continued. Spot gold fell as much as 1.5% to $5,053 an ounce, wiping out gains built earlier in the week, while U.S. gold futures slipped about 1% to around $5,080 an ounce in New York.

The pullback follows sharp swings since the start of the Iran conflict. According to Reuters data cited by analysts, spot gold jumped to $5,260 per ounce on Monday when the war began, then reversed as investors moved to raise cash. On March 3, prices fell nearly 3.6% to about $5,137 per ounce.

By Thursday, data from GoldPrice.org showed gold trading near $5,165.63 per ounce, equivalent to roughly $166.08 per gram and $166,078.74 per kilogram. Despite this week’s weakness, gold remains up about 18% for the year, supported by heightened geopolitical and trade tensions and concerns about the Federal Reserve’s independence.

Analysts highlight the firmer U.S. dollar and changing expectations for Federal Reserve policy as key drivers of the latest move. A Reuters poll showed the dollar has risen nearly 1.5% since the start of the Iran war, with the U.S. dollar index (DXY) up a further 0.11% to 98.91 by March 5. A stronger dollar typically pressures dollar‑denominated commodities such as gold.

At the same time, inflation fears linked to the conflict and its impact on global energy supply are altering views on rate cuts. The war in Iran has cut off a significant portion of global energy supply, raising concerns about higher inflation. Money markets were pricing in about 37 basis points of Fed cuts for the year on March 3, down from 60 basis points the prior Friday. Swaps traders more recently were pricing around 35 basis points of cuts by year‑end, reducing support for non‑yielding assets like bullion.

Banks and commodity strategists also point to liquidity pressures as a major factor behind gold’s choppy performance. Morgan Stanley (MS) and other analysts say some investors are selling gold to raise cash, even as they still view it as a safe‑haven asset.

Ewa Manthey, a commodity strategist at ING Bank, said part of the weakness appears driven by equity‑led risk‑on moves, with investors using gold as a source of liquidity rather than questioning its fundamentals. She added that such pressure tends to ease once equity momentum fades, leaving broader support for gold intact.

Despite the short‑term volatility, major financial institutions continue to project higher gold prices over the coming years. Morgan Stanley (MS) views the current softness as tactical rather than structural and expects gold could move toward $5,700 per ounce in the second half of 2026 if geopolitical tensions stay elevated and macro conditions stabilize.

Other banks have also issued upbeat targets. Goldman Sachs (GS) forecasts $5,400 by December 2026, UBS targets $6,200 in 2026, Deutsche Bank (DBKd) sees $6,000, and Citi Research (C) projects $5,000 over the next three months. JPMorgan (JPM) has raised its long‑term forecast to $4,500 while keeping a $6,300 year‑end 2026 price target in place.

Billionaire investor Ray Dalio has argued that allocating 5% to 15% of a portfolio to gold could make sense given perceived fragility in financial markets and changes in how central banks view fiat currencies and debt as stores of wealth, reinforcing the metal’s role in long‑term strategies even amid near‑term swings.