Gold prices stabilised on Tuesday, pausing a prolonged decline as investors weighed mixed signals from the Middle East and reassessed the outlook for inflation and interest rates.
Spot gold briefly dropped as much as 2.7 percent during Asian trading before recovering ground to hold above the 4400 dollar per ounce level. United States gold futures followed a similar pattern and edged 0.2 percent higher on the day, signalling a tentative shift in sentiment after sustained selling pressure.
The recent weakness comes after bullion declined for nine consecutive sessions. Elevated energy prices driven by conflict in the Middle East have raised concerns about persistent global inflation. This has reduced expectations for interest rate cuts and strengthened the United States dollar, both of which typically weigh on gold.
According to market strategist Frank Monkam of Buffalo Bayou Commodities, the repricing of United States monetary policy expectations combined with rising bond yields has been a key driver behind the pullback in gold.
Liquidity Pressure Drives Selling
Broader market stress has also played a significant role. Weakness across equity and bond markets has triggered a liquidity squeeze, forcing investors to sell profitable assets such as gold to raise cash and cover losses elsewhere.
Monkam noted that deleveraging among retail investors, alongside selling from emerging market participants and central banks, has accelerated the decline. Some central banks are believed to be liquidating gold reserves to support currencies and manage rising energy import costs.
Since the onset of the conflict, gold has fallen approximately 15 percent, erasing much of its gains for the year and sitting roughly 21 percent below its recent peak reached just two months ago.
Short Term Pressure May Persist
Analysts including Suki Cooper of Standard Chartered and Daniel Ghali of TD Securities have indicated that further downside pressure is possible in the near term.
Periods of extreme market stress often see gold act as a source of liquidity rather than a safe haven in the immediate phase. Historical patterns support this view. Following the Russian invasion of Ukraine, gold initially declined for several months as energy driven inflation shocks rippled through global markets.
Long Term Outlook Remains Strong
Despite the recent correction, the long term outlook for gold remains firmly intact. Central bank demand continues to provide structural support, while ongoing geopolitical uncertainty reinforces gold’s role as a store of value.
Ed Yardeni, president of Yardeni Research, has reiterated his longer term bullish outlook, maintaining a 10000 dollar per ounce target by the end of the decade. However, he has modestly revised his 2026 forecast down to 5000 dollars per ounce, still implying meaningful upside from current levels.
Major institutions remain constructive. JPMorgan, for example, has previously projected gold could reach 6300 dollars per ounce by year end.
For investors, the message is clear. Short term volatility remains elevated, but the underlying fundamentals supporting gold have not changed.
