Gold prices steady as selling pressure eases and dollar weakens

• Rebound from 12-week low in March
• Challenged safe haven perception
• Near-term volatility ‘likely to persist’

Gold prices have rebounded from late March’s 12-week low and experts foresee the precious metal holding steady as investment inflows to exchange-traded funds (ETFs) resume and a dollar rally ebbs.

Gold hit an all-time high of $5,416 an ounce on January 28, capping an extraordinary rally in which it more than doubled from roughly $2,000 at the end of 2024.

Prices subsequently tumbled after the United States and Israel launched a war against Iran on February 28, sparking a wider Middle East conflict in which the Strait of Hormuz – through which about one-fifth of global oil and liquefied natural gas supplies would usually transit – has closed to nearly all maritime traffic.

Gold slumped to a 12-week low of about $4,383 on March 26 before rebounding somewhat to trade at $4,739 on Thursday – down 13 percent from its January peak.

“Gold’s recent correction has challenged the widely held perception of bullion as a reliable safe haven during times of geopolitical stress,” Ole Hansen, head of commodity strategy at Saxo Bank, wrote in an April 9 note.

“However, the latest price action should not be mistaken for a structural shift. Instead, it reflects a combination of macro headwinds and positioning dynamics following an extended rally.”

Gold’s 12 percent price decline in March was its biggest monthly drop since mid-2013, according to a World Gold Council report published on Thursday.

Momentum factors were the chief causes of the price decline, the report states. These include outflows from gold-backed ETFs and traders unwinding bullish futures positions, while a stronger dollar and increasing yields in other assets also contributed to selling by gold investors.

Further reading:

• In a crisis, even gold gets sold
• ‘Safe haven’ dollar rises in step with oil prices
• Turkey pitches for Dubai gold trade

Gold prices tend to move inversely to the US currency, while the yellow metal is also a non-yielding asset – holders benefit solely from price increases.

The dollar index, which measures it against a basket of other leading currencies, hit a 10-month high on March 30 but has since retreated. Slowing dollar upward momentum, inflows into gold-backed ETFs in early April and the increasing likelihood of US interest rate cuts all point to gold prices stabilising, the council’s report states.

Total holdings of gold-backed ETFs are up by 20 tonnes this month, although that equates to less than one-fifth of the 94 tonnes of withdrawals in March, Saxo Bank estimates.

“Looking ahead, gold’s trajectory will remain closely tied to macro variables, particularly real yields, dollar direction, and expectations around monetary policy,” Saxo’s Hansen wrote. 

“While near-term volatility is likely to persist, the broader outlook remains constructive. The recent decline appears more consistent with a correction than the beginning of a prolonged bear market.
The council’s report also warns that “risks remain”. Were oil prices to remain above $100 for “an extended period”, it could cause governments and central banks to sell gold and investors to further de-leverage, it adds.