Global gold markets edged higher at the close of the week, as investors rotated back into traditional safe-haven assets in response to escalating geopolitical tensions and fading optimism over a near-term resolution to the Iran conflict.
Spot gold rose 2.6 per cent to settle at $4,492.74 per ounce, while gold futures advanced 2.5 per cent to $4,520.40 per ounce. The gains positioned bullion for a weekly increase of 0.4 per cent, marking a partial recovery from what had been its worst weekly performance in more than four decades.
The rebound underscores a renewed, albeit cautious, flight to safety as risk sentiment deteriorates. Investors moved away from equities and other high-risk assets, seeking refuge in gold and the U.S. dollar as hostilities in the Middle East intensified and uncertainty surrounding diplomatic efforts between Washington and Tehran deepened.
However, despite the late-week rally, gold’s performance during the current crisis has been notably subdued compared to historical norms. Analysts point to the competing influence of macroeconomic forces, particularly a stronger dollar and expectations of prolonged high interest rates, as key factors limiting the metal’s upside.
Joseph Cavatoni, senior market strategist at the World Gold Council (WGC), said the recent price action reflects a shift in market drivers rather than any weakening of gold’s underlying fundamentals.
“The rebound highlights how sensitive gold is to shifts in macro expectations. Earlier in the week, higher-for-longer rate expectations pushed yields and the dollar higher, which weighed on prices. What we’re seeing now is a recalibration,” he said.
According to Cavatoni, geopolitical risk remains a significant factor, but it is now interacting more dynamically with inflation, energy prices, and monetary policy. This evolving interplay has amplified the influence of interest rates and currency movements on gold pricing, diluting its traditional role as a straightforward hedge against uncertainty.
Rising oil prices, driven by disruptions linked to the Iran conflict, have heightened inflationary pressures globally, prompting expectations that central banks will maintain tighter monetary policy for longer. This environment tends to reduce the appeal of non-yielding assets such as gold.
Even with Friday’s gains, spot gold remains nearly 15 per cent below its level at the onset of the conflict in late February. The metal has also retreated 20 per cent from record highs reached earlier in the year, suggesting that prior overextension and shifting macro conditions have tempered investor enthusiasm.
Still, structural support for gold remains intact. Central bank demand continues to underpin the market, while elevated global debt levels and persistent geopolitical uncertainty reinforce its role as a long-term portfolio diversifier.
Market sentiment on Friday was shaped heavily by developments in the Middle East. Continued fighting and conflicting signals around diplomatic engagement kept investors on edge. U.S. President Donald Trump’s decision to extend a deadline for Iran to reopen the Strait of Hormuz did little to reassure markets, particularly as Iranian officials rejected the premise of ongoing negotiations.
Abbas Araghchi, Iran’s foreign minister, further dampened sentiment by reporting fresh strikes on critical infrastructure, including industrial and energy facilities.
With about one-fifth of global oil flows passing through the Strait of Hormuz, any sustained disruption carries significant implications not only for energy markets but also for inflation and global financial stability; factors that indirectly shape gold demand.
Looking ahead, analysts expect volatility to persist. While gold’s long-term fundamentals remain supportive, near-term price movements are likely to be dictated by the evolving balance between geopolitical risk, monetary policy expectations, and currency strength.
