Despite a recent pullback, gold, one of the top-performing financial assets over the past year, continues to be viewed optimistically by numerous institutions. During European trading hours on Thursday, spot gold experienced a sudden decline, currently trading near $4,740 per ounce, down approximately 1.65% for the day, as profit-taking emerged. Analysts at State Street noted in a Tuesday report that if the conflict involving Iran escalates further, spot gold prices could retest the $5,500-$5,600 per ounce range in March. They believe geopolitical tensions and the global macroeconomic environment continue to support gold, assigning a 35% probability that the metal will trade in the $5,500-$6,250 per ounce range one year from now.
Other institutions, such as J.P. Morgan, project gold could reach $6,300 per ounce by the end of 2026, while Deutsche Bank maintains a $6,000 target, indicating that the mainstream view on Wall Street remains positive regarding gold's long-term upward potential.
**Current Gold Price Movement and Geopolitical Influence** Despite ongoing military actions involving the US, Israel, and Iran persisting for weeks, gold's performance as a traditional safe-haven asset has been weaker than anticipated. Since the conflict began, the gold price has fallen by approximately 7%. Gold had surpassed $5,500 per ounce earlier in the year but has shown a noticeable recent correction. Expert analysis suggests this reflects market doubts about the conflict's duration and impact, coupled with a pause in buying interest following last year's substantial price surge.
**Short-Term Pressure from the Dollar and Other Factors** Key factors currently exerting short-term downward pressure on gold include a strong and fluctuating US dollar, uncertainty surrounding interest rates, and insufficient buying interest. The US Dollar Index fell over 9% in 2025, marking its worst annual performance since 2017, and hit a four-year low in January 2026. During Thursday's European session, the Dollar Index trended lower, trading near 100.10, down about 0.2% for the day, after earlier touching a one-and-a-half-month low. Although the Iran conflict recently provided some support for the dollar, State Street indicates the Wall Street consensus is for the dollar to decline by an additional 3% this year, which would stimulate demand from international buyers for dollar-priced gold. Furthermore, while a spike in oil prices has temporarily delayed expectations for interest rate cuts, most investors still anticipate the Federal Reserve will restart its rate-cutting cycle within the year.
**Interest Rate Outlook and ETF Inflows** A clearer and downward-trending path for interest rates would significantly reduce the opportunity cost of holding gold, which does not yield interest, unlike bonds. State Street anticipates that once expectations for rate cuts reignite, it could trigger a positive feedback loop: funds flowing into gold funds, tightening supply in the physical market, and driving prices even higher. In the first two months of 2026, US-listed gold ETFs saw net inflows of $10.5 billion, a sharp 67% increase compared to the same period last year. Despite these strong inflows, gold funds still account for less than 1% of global ETF and mutual fund assets, indicating that gold remains an under-allocated asset in institutional portfolios.
**Crowded Trade Warning** Not all views are uniformly positive. The Bank of America Global Fund Manager Survey from March showed that 35% of respondents identified "Long Gold" as the most crowded trade on Wall Street, topping the list for the third consecutive month. A net 38% of respondents viewed gold as overvalued, up from 31% in February. This rising perception of a crowded trade could limit short-term upside potential and help explain gold's relatively subdued recent performance.
The gold market is currently at a critical juncture of tug-of-war between bullish and bearish forces. Geopolitical conflict and potential dollar weakness provide long-term support, while Fed rate cut expectations and robust ETF inflows strengthen the buying foundation. However, warnings of a crowded trade and short-term dollar rebounds present resistance. Overall, structural demand, such as from central banks and institutional allocation, remains dominant. The current pullback may represent consolidation at a higher level rather than a trend reversal. Investors should closely monitor developments in the Iran situation, the US Dollar Index, and signals from the Federal Reserve to assess whether the safe-haven narrative will reassert itself.
As of the latest update, spot gold was quoted at $4,737.40 per ounce.
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