Gold’s remarkable two-year rally is losing momentum, with analysts warning the yellow metal could be headed for its sharpest monthly decline in nearly two decades as a stronger US dollar, fading hopes of interest-rate cuts and surging energy prices reshape investor sentiment.
Although bullion briefly stabilised above $4,700 an ounce this week after a sharp sell-off, the recovery is widely seen as fragile.
In Dubai, prices edged higher on Wednesday, reflecting short-term bargain buying rather than a structural rebound. At 8pm, 24K gold traded at Dh576 per gram, up from Dh563.25 a day earlier, while 22K rose to Dh534 from Dh521.50 — modest gains after a volatile March that unsettled retail buyers and traders across the UAE.
Despite the rebound, bullion has fallen more than 13 per cent in March alone, putting it on track for its steepest monthly decline since the global financial crisis of 2008.
Prices remain about 14 per cent below levels seen when the US-Israeli conflict with Iran escalated on February 28, underscoring a surprising shift in gold’s traditional safe-haven role.
Analysts say the biggest drag on gold has been the rapid repricing of US monetary policy expectations. Money markets have almost completely priced out interest-rate cuts this year after previously anticipating at least two reductions, sharply raising the opportunity cost of holding non-yielding assets such as bullion.
“The recovery that we’re seeing in gold is something of a dead-cat bounce,” said independent analyst Ross Norman, noting that markets remain cautious about the durability of any rally until geopolitical tensions ease and the dollar weakens.
The greenback itself has been another major headwind. The US currency is heading for its strongest monthly gain since July, making dollar-priced commodities more expensive for international buyers and dampening global demand. At the same time, rising oil prices linked to the month-long Middle East conflict have increased recession fears, prompting investors to favour cash and defensive assets over precious metals.
Options markets are also signalling caution. Risk reversals remain firmly negative, indicating traders continue to pay premiums for downside protection rather than betting on further gains. Implied volatility has climbed again, suggesting expectations of larger price swings — but with a clear bearish bias.
A Dubai bullion trader said the macro backdrop currently offers little support for a sustained rally. With oil prices elevated, geopolitical uncertainty lingering and the dollar holding near highs, gold’s upside may remain limited unless a strong risk-on catalyst emerges. Some traders now see the $4,000 level as a potential downside target in the near term.
Interestingly, the metal’s recent behaviour has challenged conventional market assumptions. Historically, geopolitical tensions boosted gold prices, yet bullion has weakened sharply during the latest conflict. Analysts at HSBC Asset Management say gold is increasingly behaving like a risk asset rather than a safe haven in 2026.
“A stronger dollar has certainly been a headwind, deterring non-US buyers, while a hawkish repricing of interest rates has increased the opportunity cost of holding a non-yielding asset,” HSBC analysts noted. They added that a growing share of ownership among retail and leveraged investors has amplified volatility, forcing liquidation during periods of market stress.
HSBC’s chief precious metals analyst James Steel expects volatility to remain the defining theme for bullion markets this year, particularly as investors reassess the relationship between gold, interest rates and Treasury yields — correlations that have weakened significantly in recent years.
Still, the longer-term outlook remains constructive. Central banks have continued accumulating gold at rates two to three times higher than historical averages since 2022, reflecting efforts to diversify reserves amid gradual global de-dollarisation trends.
Goldman Sachs also maintains a bullish long-term view, projecting prices could reach $5,400 per ounce by the end of 2026 if monetary easing resumes later in the cycle.
However, for now, the near-term trajectory is being dictated less by geopolitical headlines and more by macroeconomic fundamentals. Movements in the US dollar, interest-rate expectations and energy markets are emerging as the decisive forces shaping bullion’s direction — signalling that gold’s path forward may remain volatile and biased to the downside in the months ahead.
