25/03/2026 03:56 AST
Gold prices have entered a sharper-than-expected correction phase, slipping below key technical levels despite intensifying geopolitical tensions in the Middle East, as analysts warn the precious metal could face further downside pressure amid rising bond yields, a resilient US dollar and heavy profit-taking after last year's historic rally.
Spot gold was trading near $4,343 an ounce, down about 1.4 per cent, after briefly dropping below the $4,200 level earlier this week - its lowest since December 2025. The decline marks one of the steepest pullbacks of the current cycle and underscores an unusual divergence from gold's traditional role as a safe-haven asset during conflict.
Silver mirrored gold's decline, falling about 3.5 per cent to $66.5 an ounce, reflecting weaker investor appetite and concerns about slowing industrial demand.
Analysts say the latest sell-off reflects a powerful shift in macroeconomic drivers rather than any structural deterioration in gold's long-term outlook. Rising US Treasury yields and reduced expectations of aggressive rate cuts by the Federal Reserve have strengthened the dollar, making non-yielding assets such as gold less attractive.
According to XS.com senior market analyst Rania Gule, the precious metals market is entering a decisive consolidation phase shaped by competing bullish and corrective forces. She said gold still retains strong structural support from geopolitical fragmentation and institutional hedging demand but warned that a move back toward $4,800 would require a fresh catalyst such as financial-market stress or a sharp escalation in geopolitical risks.
At the same time, she noted that prices could retreat toward $3,800 if bond yields remain elevated and the dollar continues to strengthen - a correction she described as a rebalancing phase rather than the end of the broader bull cycle.
A similar view is echoed by strategists at the World Gold Council, who say persistent central-bank purchases remain a key pillar supporting long-term prices despite short-term volatility. Official sector buying has stayed near record levels over the past two years as countries diversify reserves and hedge against currency risk.
However, some analysts warn that central-bank demand may soften temporarily as energy-importing economies redirect resources toward securing fuel supplies and stabilising domestic markets during the ongoing oil shock.
US Bank Wealth Management senior investment strategist Rob Haworth described the earlier surge in gold prices as a speculative "blow-off top," arguing that rising real interest rates and liquidity demand are now undermining the metal's appeal.
He noted that safe-haven flows are currently favouring the US dollar rather than gold, as governments and companies prioritise access to liquidity to manage supply-chain disruptions and rising energy costs.
"The longer this goes on, the worse it will get; it's holding oil prices up, hurting the global economy - but it's not helping gold," Haworth said.
Even inflation-protected securities and government bonds have struggled to attract defensive flows, with yields climbing to multi-month highs and reinforcing pressure on precious metals.
Meanwhile, analysts at Goldman Sachs maintain that structural drivers supporting gold - including reserve diversification by emerging-market central banks and persistent geopolitical uncertainty - remain intact despite near-term volatility. Strategists at Citi also expect the long-term trajectory to remain upward, although the pace of gains will depend heavily on interest-rate expectations and currency movements.
Silver's outlook remains more closely tied to industrial demand. Analysts expect the metal to trade within a $60-$80 range depending on manufacturing activity in major economies, making it more sensitive than gold to global growth expectations.
The most striking feature of the current correction is that gold has weakened even as the Iran-US confrontation continues to threaten shipping routes and energy infrastructure - conditions that would normally trigger strong safe-haven inflows. Instead, investors appear to be rotating into dollar assets after last year's rally pushed gold into overstretched territory.
For investors in the UAE and wider Gulf, the correction is being closely watched as a potential entry opportunity. While short-term risks remain tilted to the downside, analysts say the longer-term outlook still rests on firm foundations supported by central-bank accumulation, geopolitical fragmentation and persistent inflation risks linked to elevated energy prices - factors that could eventually set the stage for the next breakout phase in gold's multi-year bull cycle.
Khaleej Times
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