Since the escalation of tensions in the Middle East, gold's price action has not reflected its traditional safe-haven characteristics. Following the joint U.S. and Israeli strikes against Iran, the price of gold has fallen by nearly a quarter. However, Barclays believes this correction is approaching a reasonable range, with prices nearing its calculated fair value of $4,150 per ounce, setting the stage for a potential subsequent rebound.
Building on this assessment, Barclays' cross-asset research team recommends focusing on shares of related mining companies, including Endeavour Mining (EDV), Hochschild Mining (HOC), Fresnillo (FRES), Newmont (NEM), and Agnico Eagle Mines (AEM).
A research team led by Lefteris Farmakis and Themistoklis Fiotakis published a report on Monday, analyzing the recent weakness in gold prices. The report notes that the strength of the U.S. dollar, the increased attractiveness of equities for risk capital, and overly concentrated market positioning have collectively amplified the scale and pace of the sell-off.
The team judges that these influences are primarily temporary disruptions rather than long-term trends. Gold's core supportive logic remains intact, including persistent inflationary pressures, policy uncertainty, and the demand from central banks to diversify their reserves. Once geopolitical tensions ease, these factors are expected to reassert their dominance over price direction.
Barclays maintains its gold price forecasts for the next two years unchanged, expecting prices to reach $4,791 per ounce in 2026 and $4,900 per ounce in 2027. However, the report also cautions that prices may still experience some degree of downward volatility around current levels in the near term.
From a model-based perspective, a 1 percentage point increase in inflation typically drives a roughly 5% rise in gold prices. Therefore, the recent inflationary pressures stemming from energy shocks should have provided support for gold.
Nevertheless, the approximately 26% decline from the January peak to the June low reflects the combined effect of multiple factors. These include the rebound in real interest rates (the difference between bond yields and inflation), the market gradually pricing out expectations for Federal Reserve rate cuts in 2026, and the short-term diversion of funds into a rising equity market.
Barclays calculates that the rapid appreciation of the U.S. Dollar Index and the approximately 10% gain in the S&P 500 index alone correspond to about a 10% downside for gold prices; the remainder of the decline is attributed mainly to the unwinding of crowded trades and leveraged positions.
Additionally, gold sales by the central banks of Russia and Turkey to support their respective currencies (the ruble and the lira) have exerted extra pressure on the market.
The report emphasizes that the factors truly determining gold's long-term trajectory—U.S. consumer price inflation and global central bank gold purchases—are "slow-moving variables," whose effects accumulate over time. This explains why these factors have not provided significant support to gold prices since the onset of the Iran crisis.
Barclays anticipates that in the coming period, the U.S. dollar may weaken again, central bank gold buying will resume a stable pace, and rising energy prices will continue to exert upward pressure on inflation. These shifts are expected to gradually improve the fundamental backdrop for gold.
The report states: "Despite recent price volatility, if there is a time when gold should trade at a premium, it is now."
Based on this analysis, Barclays views the current phase as a window of opportunity to position in gold-related assets and specifically highlights the aforementioned mining companies as potential beneficiaries.
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