Gold’s historic rally has entered a volatile new phase as surging oil prices, intensifying geopolitical tensions in the Middle East and uncertainty over US monetary policy collide to reshape global financial markets.
Yet analysts say the recent pullback in bullion prices may represent not the end of the rally but a consolidation phase in what remains one of the most powerful gold bull markets in modern history.
Spot gold was trading around $5,160–$5,170 per ounce on Tuesday, rebounding modestly after slipping below $5,100 earlier this week as investors reassessed inflation risks triggered by the sharp rise in energy prices and the evolving outlook for US interest rates.
In the UAE — one of the world’s largest physical bullion trading hubs — retail gold prices also edged higher. The price of gold rose to Dh609.75 per gram on Tuesday, compared with Dh606.76 a day earlier, while prices reached Dh7,111.98 per tola, according to market data compiled by FXStreet.
The volatility comes after a spectacular rally that has seen gold climb from roughly $2,600 per ounce a year ago to above $5,500 at its peak earlier this year, as investors worldwide sought protection against geopolitical shocks, inflation and currency volatility.
But the global macroeconomic landscape is shifting again — and the precious metal now sits at the intersection of several powerful forces shaping the world economy.
The most immediate catalyst is the surge in oil prices triggered by the escalating conflict in the Middle East. Military tensions involving Iran, Israel and the United States have raised concerns about the security of energy supplies from the Gulf region.
At the heart of those concerns lies the Strait of Hormuz, the narrow maritime corridor between Iran and Oman through which roughly 20 per cent of the world’s oil supply flows. Any disruption to tanker traffic through the strait could send energy prices sharply higher and reignite global inflation pressures.
Oil markets have already begun pricing in a geopolitical risk premium as the conflict intensifies, fuelling concerns that a prolonged disruption could ripple through the global economy.
Rising energy prices have complicated the outlook for central banks — particularly the US Federal Reserve — by reviving fears of persistent inflation.
Rania Gule, senior market analyst at XS.com, said higher oil prices are reshaping expectations for the trajectory of US monetary policy.
“Rising oil prices ripple across the entire economy and reinforce inflation expectations,” she said. “If inflation pressures remain elevated, the Federal Reserve may be forced to keep interest rates higher for longer.”
That prospect has pushed US Treasury yields higher and strengthened the US dollar, two forces that traditionally weigh on gold prices. Because bullion is priced in dollars, a stronger greenback makes the metal more expensive for international investors, often dampening global demand.
Markets are now closely focused on the Federal Reserve’s upcoming March 17–18 policy meeting, where policymakers are widely expected to hold interest rates steady while assessing the inflation outlook and the broader economic impact of geopolitical tensions.
Despite these short-term pressures, analysts say the structural drivers behind gold’s rally remain firmly intact.
Historically, gold has thrived during periods of geopolitical instability and financial uncertainty. The current global environment — marked by wars, trade tensions and shifting economic alliances — continues to reinforce the metal’s safe-haven appeal.
Central banks have emerged as one of the strongest pillars of the gold market. Governments around the world have been steadily increasing their bullion reserves as part of a broader effort to diversify away from the US dollar and strengthen their financial buffers.
According to the World Gold Council, central banks purchased roughly 230 tonnes of gold in the fourth quarter of 2025, extending a multi-year buying spree that has become one of the most powerful structural drivers of demand.
Institutional investors are also increasing their exposure to gold. Exchange-traded funds linked to bullion have attracted significant inflows as investors seek protection from geopolitical shocks, currency volatility and stock-market turbulence.
Major investment banks remain broadly bullish about gold’s long-term outlook. Some analysts believe the metal could climb toward $6,000 per ounce or higher in the coming years if geopolitical tensions persist and central-bank demand continues at current levels.
Hiren Chandaria, managing director at Monetary Metals, said the latest pullback should be viewed in the context of the market’s extraordinary gains.
“When markets rally this strongly, periodic corrections are inevitable,” he said. “But when the underlying drivers — geopolitics, inflation risks and central-bank demand — remain intact, those corrections often attract new buyers.”
Technical indicators also suggest that gold’s long-term uptrend remains firmly in place. Prices continue to trade above key support levels, including major moving averages widely watched by institutional investors.
For markets in the Gulf region, the interplay between oil and gold has become particularly significant.
Dubai has long been one of the world’s most important gold trading hubs, serving as a bridge between producers in Africa and Central Asia and consumers in India and China. Any major shifts in global bullion demand are therefore quickly reflected in the emirate’s bustling gold souks and wholesale trading markets.
At the same time, the region’s economic fortunes remain closely tied to oil prices. A sustained energy shock could boost Gulf government revenues while simultaneously fuelling global inflation — a dynamic that historically strengthens demand for gold.
For investors navigating an increasingly uncertain world, analysts say volatility is likely to remain a defining feature of the gold market in the months ahead.
Oil price swings, inflation data and signals from the Federal Reserve will drive short-term fluctuations, while geopolitical developments could trigger sudden surges in safe-haven demand.
Many strategists believe that any deeper pullback toward the $5,000 level could present a compelling entry point for long-term investors seeking protection against inflation, currency volatility and geopolitical shocks.
In that sense, the latest pause in gold’s rally may not signal a turning point — but rather a breather in what many analysts still see as a powerful structural bull market driven by global uncertainty and the shifting balance of the world economy.
