Despite a dramatic U.S. airstrike targeting Iranian nuclear facilities and escalating tensions across the Middle East, gold prices have remained surprisingly stable. Contrary to market expectations of a sharp spike, the precious metal lost around $50 per ounce last week and is currently trading at approximately $3,360 per ounce. Analysts point to the strengthening U.S. dollar as the primary factor suppressing gold’s rise.
Stronger Dollar Overshadows Gold’s Safe-Haven Appeal
Instead of turning to gold as a traditional safe haven, investors facing heightened uncertainty sought refuge in the U.S. dollar. With its global liquidity and reliability during crises, the dollar overshadowed gold’s appeal—at least in the short term. As a result, despite the geopolitical shock, gold prices have shown minimal movement.
Gold also failed to react to former President Donald Trump’s dramatic statement labeling the airstrike “the greatest military operation in U.S. history.” Investors, for now, are not anticipating immediate escalation, and the response across commodity and financial markets has remained muted.
Strait of Hormuz and Inflation Risks Loom Large
That said, the situation may change rapidly. Iran has announced plans for retaliation and is considering a blockade of the Strait of Hormuz—a critical corridor for global oil and LNG trade. The Iranian parliament has approved a strategy pending confirmation from the Supreme National Security Council. Goldman Sachs warns that an actual blockade could push oil prices above $120 per barrel, triggering a new wave of inflation, especially in Asian economies and the United States.
Fed Policy Overshadowed by Politics and Stagflation Concerns
The Federal Reserve has kept interest rates unchanged, but its recent messaging has grown more cautious. Revised projections now anticipate slower GDP growth and higher inflation—signs pointing toward an increasingly likely stagflation scenario.
Meanwhile, Donald Trump has publicly criticized Fed Chair Jerome Powell and suggested he might replace him if he returns to the White House. One of the rumored candidates is Christopher Waller, who has hinted at the possibility of interest rate cuts as early as July.
Central Banks Continue to Accumulate Gold
Despite the current price stagnation, gold’s long-term fundamentals remain strong. According to the World Gold Council (WGC), 95% of central banks plan to increase their gold reserves within the next year. Moreover, 73% of them intend to reduce their exposure to the U.S. dollar—signaling a significant shift in global currency architecture.
Central banks are swapping dollars for gold, viewing it as a neutral and secure reserve asset—particularly in the context of rising U.S. public debt and ongoing geopolitical instability.
Forecast: $4,000 Gold Within a Year?
Bank of America maintains a bold outlook, predicting gold could reach $4,000 per ounce by mid-2026. While geopolitical tensions play a role, the primary drivers are weakening trust in the dollar and growing concerns over the United States’ long-term solvency. Trump’s push for a massive budget spending package—referred to as a “big beautiful bill”—is expected to exacerbate these fears.
Nassim Nicholas Taleb, author of The Black Swan, echoed this sentiment in a recent analysis: “Gold is now the only effective reserve currency. The dollar is merely a transactional tool.”
Conclusion: Gold Quiet for Now, But Poised to Surge
While gold hasn’t soared in response to the U.S. attack on Iran, its muted performance doesn’t imply a lack of potential. On the contrary, markets increasingly recognize gold as a strategic asset with enduring long-term value.
If immediate de-escalation in the Middle East fails to materialize, and the dollar begins to weaken due to political and monetary shifts, gold may not only rebound—but also set new all-time highs.
— Michał Tekliński
Source: ceo.com.pl
