has dropped sharply since the Iran war began, falling to around $4,600 an ounce from highs above $5,500. The move reflects a powerful shift in the macro backdrop rather than any change in gold’s long-term trajectory.
Energy markets are driving the current price action. have surged on escalating tensions in the Middle East, feeding inflation expectations and forcing markets to reassess the timing of . Higher-for-longer rates increase the opportunity cost of holding gold and have triggered this sell-off.
A similar pattern played out in 2022 after Russia’s invasion of Ukraine. Energy prices surged, inflation accelerated, and gold entered a prolonged period of decline. Prices fell for seven consecutive months through to October, the longest losing streak on record.
Those same forces are back in play.
Beneath the surface, the structural drivers of gold demand have strengthened further.
Central banks are buying at a pace not seen in decades. Annual purchases have exceeded 1,000 tonnes for three consecutive years, including approximately 1,045 tonnes in 2025. This represents one of the strongest periods of sovereign accumulation since the 1960s.
China continues to add to reserves. Poland has emerged as one of the most aggressive buyers globally. More than 20 central banks increased their gold holdings over the past year, with emerging economies leading the trend.
Reserve strategy is shifting.
The freezing of Russia’s foreign reserves in 2022 forced a reassessment of currency exposure across central banks. Gold has become a core component of reserve diversification because it carries no counterparty risk and no political conditions.
De-dollarization is progressing through allocation decisions. The dollar remains dominant, yet its share of global reserves continues to edge lower. Gold’s share is rising alongside it.
Survey data shows that around three-quarters of central banks expect gold to make up a larger share of reserves over the next five years. The direction of travel is clear.
Central banks are accumulating and holding, tightening available supply and reinforcing long-term price support.
Institutional and private demand is building alongside this. Combined central bank and investor demand is expected to average around 585 tonnes per quarter through 2026. Capital remains positioned for re-entry.
The current pullback is tied to inflation expectations and rate repricing driven by energy markets. A shift in those conditions changes the short-term outlook quickly.
Gold has already traded above $5,000 in recent months, supported by sustained demand rather than speculative flows.
Positioning has been disrupted by the recent sell-off. Re-entry is likely to be decisive once macro conditions stabilise.
Signs of de-escalation in the Middle East would ease pressure on energy markets, reduce inflation expectations, and bring rate cuts back into focus. That combination supports renewed momentum in gold.
Fresh all-time highs are within reach in the near term.
Sustained central bank accumulation, gradual reserve diversification away from the dollar, and persistent geopolitical risk continue to underpin demand.
The next phase of the move is likely to be fast and driven by capital returning at scale.