Gold Stuck in Neutral Amid Iran Conflict and Hawkish Fed

Gold's price has remained largely unchanged despite escalating tensions in the Middle East and rising oil prices. The metal is currently trading near $4,070 per ounce, roughly 27% below its January 2026 record peak of approximately $5,590.

The Iran conflict has triggered a renewed US military response and increased risks to energy markets. However, instead of driving up demand for gold as a safe-haven asset, the situation has led to higher oil prices, which in turn have pushed inflation expectations up and made real yields rise. This has reduced the attractiveness of holding gold.

The Federal Reserve's hawkish policy orientation under new Chairman Kevin Warsh has also contributed to the decline in gold prices. Forward rate expectations have repriced, with September rate-hike odds increasing from 51% to 55%, which has lifted real yields and made gold less attractive at the margin.

Institutional investors, including those holding SPDR Gold Shares (GLD), the largest US-listed gold ETF, have reduced their exposure in response to rising real yields. Central banks, however, continue to increase their gold reserves, with a record 45% of reserve managers planning to expand their institutions' gold holdings.