Gold Prices Rebound as Dollar Eases and Middle East Tensions Persist
Gold prices rose on Wednesday, recovering from the sharp losses recorded in the previous session as investors reassessed safe-haven demand amid escalating tensions between the United States and Iran and recent strength in the U.S. dollar.
At 08:35 ET (13:35 GMT), spot gold climbed 2% to $5,188.08 per ounce, while U.S. gold futures increased 1.4% to $5,196.86 per ounce.
The precious metal had fallen 4.5% on Tuesday, pressured by a surge in the U.S. dollar and rising U.S. Treasury yields, both of which tend to weigh on gold prices.
Gold Supported by Slightly Weaker Dollar
The U.S. Dollar Index edged lower on Wednesday, after rallying nearly 1.5% over the previous two days and reaching six-week highs overnight. The earlier dollar strength had been driven by safe-haven demand and declining expectations that the Federal Reserve will cut interest rates in the near term.
Because gold is priced in dollars, a stronger dollar makes the metal more expensive for investors using other currencies, which can reduce global demand.
Geopolitical Risks Continue to Support Gold
Persistent geopolitical tensions in the Middle East also provided support for gold prices. The conflict between the U.S. and Iran intensified after coordinated U.S. strikes on Iranian-linked targets triggered retaliatory threats from Tehran, raising concerns about wider regional instability.
Market participants are increasingly worried that the confrontation could disrupt global energy supplies and pull additional regional powers into the conflict. However, reports released on Wednesday suggested that Iran may be seeking a way to end the hostilities, which slightly eased market fears.
In a notable development, NATO forces intercepted a ballistic missile launched from Iran toward Turkish airspace. This marked the first time the alliance defended a member state from an Iranian projectile since hostilities involving the United States, Israel, and Iran escalated last week.
Analysts at ING noted that geopolitical developments continue to influence gold markets, but broader macroeconomic forces remain the main driver.
According to the bank:
“Geopolitical tensions provide limited support, but macroeconomic factors dominate short-term price movements. The duration of the Middle East conflict will be crucial. Prolonged escalation would support gold prices, while stabilization could expose the metal to macro headwinds.”
Central Bank Gold Demand Slows at the Start of the Year
Demand from central banks remains an important structural support for gold, although buying activity slowed at the beginning of the year.
Data from the World Gold Council showed that central banks purchased a net 5 tonnes of gold in January, significantly below the 2025 monthly average of 27 tonnes and marking the weakest monthly demand since late 2024.
ING analysts explained that volatile gold prices and seasonal trends may have contributed to the slowdown. However, they noted that the number of central bank buyers has broadened, with new institutions entering the market.
Rising Oil Prices Add Pressure to Global Monetary Policy
Meanwhile, oil prices remained elevated, driven by concerns that the Middle East conflict could disrupt supplies along critical shipping routes in the Persian Gulf.
Higher crude prices have increased inflation risks, making the policy outlook more complicated for global central banks.
Analysts say the gold market is currently balancing two opposing forces: safe-haven demand fueled by geopolitical uncertainty and macroeconomic pressures created by a strong dollar and higher bond yields.
Silver, Platinum and Copper Also Rise
Other precious metals also recovered after sharp losses earlier in the week.
Silver prices surged 2.8% to $85.85 per ounce, following a drop of more than 8% in the previous session.
Platinum rose 4.4% to $2,166.60 per ounce, rebounding after a 10% decline on Tuesday.
In industrial metals, benchmark copper futures on the London Metal Exchange gained 0.8% to $13,046 per ton, while U.S. copper futures climbed 1.4% to $5.9090 per pound.
Mixed Signals from China’s Economic Data
Economic indicators from China showed mixed signals. Official PMI data indicated that manufacturing activity remained in contraction territory, while private-sector surveys from RatingDog PMI reported stronger-than-expected expansion, highlighting a divergence in the outlook for the world’s second-largest economy.
