A pause in conflict brings a shift in momentum

After weeks of pressure, gold and silver have found some footing again. Overnight, both metals moved higher following news of a two-week ceasefire between the U.S. and Iran. The reaction was fairly immediate, gold rose 2% past $4,800 at one point, whilst silver pushed past $76 - an increase of 4%. At the same time, oil prices dropped sharply and the dollar softened, which tends to be more accommodating conditions for precious metals.

From headwinds to something more supportive

The recent weakness in gold hasn’t been down to a loss of interest but rather a case of competing forces. During the conflict, rising oil prices strengthened the dollar, while higher yields made income-generating assets more attractive. Add in margin calls across wider markets, and gold, being highly liquid, was often sold to raise cash. In short, gold was caught up in the mechanics of the market rather than falling out of favour.

As always, context matters, and it's important to note that whilst the gold price had declined in the early stages of the conflict, it followed an extended bull run that saw prices reach record highs earlier in the year. Some consolidation was always likely. That process appears to be playing out, with a period of adjustment rather than a change in direction.

The underlying drivers remain

With a ceasefire underway, albeit in delicate circumstances, the markets are once again exposed to the underlying drivers that have been present for the last 12months. This includes Central banks continuing to buy gold at record levels, diversifying from an over reliance of US Dollar backed assets. The US economy remains fragile, with the Fed under pressure to cut interest rates before the conflict - whether this happens now remains a key question in determining the future movements of the gold price in 2026. And finally, inflation still poses a problem across several major economies, including the US. The easing of immediate conflict allows the market to refocus on these fundamentals.

Whether this develops into a sustained rally will depend on what follows. If the ceasefire holds and expectations around interest rates continue to soften, the environment becomes more constructive. And if the past year has shown anything, it’s that once momentum returns, it rarely does so quietly.