The strategist says these three "forces" are suppressing gold

Investing.com – Despite escalating geopolitical tensions, gold prices are still under pressure. According to a strategist, since the conflict began, gold has fallen by roughly 13%, which runs counter to expectations that the war would drive a sustained rise.

This weakness is driven by three key factors.

First, a stronger U.S. dollar and rising interest-rate expectations are weighing on gold. A stronger dollar increases the cost for investors holding other currencies to buy gold, while higher yields raise the opportunity cost of holding non-yielding assets like gold. This macro backdrop has historically been a headwind for precious metals, and it remains the dominant driver behind the recent price action.

Second, positioning and technical factors also played a role. Gold, especially silver, has recently entered an overbought zone, making the price vulnerable to a pullback. When risk-aversion sentiment erupts, crowded trades can unwind sharply as investors scramble to boost liquidity. The strategist pointed to past examples, including during the 2008 financial crisis, when, despite broad market stress, gold still saw a sharp short-term drop.

Third, central-bank demand appears to be weakening. Reports say some governments are scaling back their gold purchases to prioritize other spending needs. It is also claimed that the central bank of Poland is considering selling gold to fund defense spending, while Turkey has already sold reserves in recent weeks to support its currency. There are also signs that some Gulf states may slow their buying pace due to reduced export revenues.

Despite these pressures, the strategist expects these headwinds to ease over time. As dollar strength fades, interest-rate expectations stabilize, and official-sector demand normalizes, gold may regain its footing.

The report maintains a constructive long-term outlook for gold, arguing that the current weakness reflects cyclical pressure rather than a shift toward broader bullish arguments.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.