Gold has fallen by as much as $1,000. The current market environment is encouraging investors to lock in profits and move funds into cash. Investment funds are now selling off gold aggressively.
The fourth week of the conflict in Iran, triggered by Israel and the United States, has brought further turbulence to financial markets. Oil prices have been fluctuating less sharply, with Brent crude trading near USD 100 per barrel. Much more dramatic moves have been seen in the precious metals market, which is reacting to the growing risk of a return to interest rate hikes. At present, the US dollar remains the dominant force in global markets. After several years of weakness, it is regaining momentum and acting as the main safe haven amid renewed fears of higher inflation driven by rising oil and gas prices.
Although gold has long been regarded as an asset that protects against uncertainty and inflation, in reality it rarely serves as an effective shield against a sharp rise in prices. The belief in its anti-inflation properties is a myth rooted in the 1970s and 1980s, when a unique combination of factors led to both a weakening dollar and a surge in the price of the metal.
“Gold performs best during periods of low or moderate inflation, when investors buy it in anticipation of a coming crisis,” Michał Stajniak, Deputy Director of the Analysis Department at XTB, said in an interview with MarketNews24. “The current situation, however, is prompting market participants to take profits on gold and other precious metals and shift funds into cash and US Treasury bonds, which offer attractive yields under current conditions.”
This large-scale flow of capital is reinforcing the dollar’s dominance, even though its exchange rate remains relatively low by historical standards. Gold has already fallen by one quarter from its record highs in January to lows near USD 4,100 per ounce. Since the beginning of the year, this leaves it with a return of just 4%. Silver, meanwhile, has slipped toward USD 60 per ounce, reaching its lowest level since mid-December.
A sharp sell-off in these positions is now underway, as confirmed by data showing a reduction in gold holdings by ETF funds. This suggests that hedge funds, which built strong positions at the end of 2025, are now exiting them completely. Another important factor is the threat of inflation returning and the possibility that the cycle of interest rate hikes could resume.
“It can be assumed that the rise in metal prices up to the turn of November and December last year was driven by purchases by central banks and ETFs, while the subsequent gains were purely speculative in nature,” the XTB expert commented.
There is also speculation that Arab states may sell part of their gold reserves to plug budget gaps created by the suspension of trade in the Persian Gulf region, although these reports have not yet been confirmed by hard data.
At the same time, there are also reports suggesting that strong demand for gold purchases by central banks will continue throughout 2026.
“I would not throw away forecasts made a few months ago that gold could reach USD 6,000 in 2026,” Stajniak of XTB concluded. “However, in the coming weeks we should get used to elevated volatility in gold and prices fluctuating in the range of USD 4,000 to USD 4,500 per ounce.”
For Polish investors, this is a somewhat less favorable time to invest in gold because the zloty has weakened against the dollar. However, this change is less significant compared with the volatility of the global gold price, and the current trend is likely to prove short-term, as it stems from the armed conflict in the Persian Gulf. In the case of gold investing, a long-term strategy remains the recommended approach.
