Gold's 9% rebound in August, pushing prices to around $4,400 an ounce, suggests bullion is starting to regain favor with institutional investors and central banks — leaving the market better positioned to extend its gains as it moves beyond the initial shock of the US-Israeli war with Iran.
A Dramatic Round Trip
Gold's price action over the past seven months has been extraordinary by any historical measure. The metal hit a record high of $5,595 an ounce in January, before the war's outbreak on February 28 triggered a steep reversal: as investors sought liquidity and some central banks tapped reserves to support domestic economies amid a sharp oil price rally, gold tumbled to below $4,000 by June — a decline of more than 20% from its pre-war levels, and its steepest monthly drop since 2008. "It feels as though the handbrake has finally been released from gold," said independent analyst Ross Norman, describing the recent turnaround.
What's Driving the Rebound
Gold prices have broken above two key technical resistance levels this month, aided by softer US inflation data that has reduced expectations for further Fed rate hikes, along with a pullback in oil prices from their recent peaks. Andrew Steel, an analyst tracking the market, said the strength of the rebound over the past two weeks suggests central banks or sovereign wealth funds may have been active buyers again, though he stressed this was an inference rather than confirmed information. He pointed to institutional demand for large gold bars as further evidence, noting that premiums in Asian trading hubs — including a $1.50-an-ounce premium in China last week — implied renewed buying interest. "It is really, I think, the rebuilding of positions that large institutions had before the conflict with Iran," Steel said.
Why Gold Fell So Sharply in the First Place
Gold's mid-war slide ran counter to gold's traditional role as a crisis hedge, and reflected a more complex dynamic than a simple flight to safety. As the war escalated and blocked much of the Strait of Hormuz's oil traffic, surging energy prices fed inflation fears and pushed markets to price out any prospect of Fed rate cuts in 2026 — a sharp reversal from pre-war expectations of two cuts. That shift toward a more hawkish monetary policy outlook drove investors instead toward the US dollar as their preferred safe haven, putting relentless pressure on gold even as geopolitical risk stayed elevated. Weak jewelry and coin demand throughout the conflict compounded the selloff, since consumer buying tends to pull back sharply when prices are volatile and economic uncertainty is high.
What Could Limit the Upside
Analysts caution the rebound isn't without risk. Faltering talks aimed at ending the Iran war remain a key overhang, alongside continued weak jewelry and coin demand and lukewarm flows into gold-backed ETFs, which tend to be highly sensitive to interest-rate expectations. James Steel (a separate analyst from Andrew Steel, cited above) noted that gold's path forward depends heavily on oil: "If oil doesn't steal the show again, if the situation in the Middle East does not erupt and oil prices spike, then it looks as if the path of least resistance for gold is higher." In other words, a fresh oil price shock tied to renewed Hormuz escalation could just as easily pull gold's attention — and safe-haven flows — back toward energy markets rather than bullion.
The Bigger Picture
Gold's rollercoaster year illustrates just how unpredictably safe-haven assets can behave during a prolonged, evolving conflict — rising on initial shock, falling as rate expectations shift, and now potentially recovering as markets settle into a longer-term view of the war's economic consequences. With the Strait of Hormuz standoff still unresolved and US-Iran negotiations continuing in fits and starts, gold's next moves are likely to remain closely tied to how that broader conflict evolves. For live gold price tracking, see Kitco's precious metals data.
Whether this rebound marks the start of a sustained recovery or another temporary bounce within a volatile trading range, analysts agree that gold's fortunes for now remain tightly bound to the trajectory of the Iran war — and, above all, to what happens with oil.