According to the latest research report from Barclays, gold prices have fallen by 26% during the previous geopolitical conflict with Iran. In the short term, the diversion of funds from the US dollar, US Treasury yields, and the stock market has suppressed gold prices, but the long-term supporting logic of inflation, reserve diversification, and central bank gold purchases remains unchanged.

Institutions maintain an optimistic outlook, predicting that gold prices will approach $4,800 per ounce in 2026 and rise to $4,900 per ounce in 2027, with a recovery expected after geopolitical tensions ease.

Multiple short-term factors dragged down gold prices, leading to a deep correction.

A research team from Barclays, led by Lefteris Farmakis and Themistoklis Fiotakis, released a research report on Monday (June 15) reviewing the recent three-month decline in gold prices.

The report states that the continued strengthening of the US dollar, the booming US stock market diverting risk funds from the market, the concentrated liquidation of leveraged speculative positions, and the sale of gold by the central banks of Russia and Turkey have all contributed to the downward pressure on gold prices.

Gold prices have fallen 26% from their year-to-date high in January to a low in June. This decline is essentially due to the correction in real yields, with the market continuously lowering its expectations for a Fed rate cut this year. The short-term yield advantage of equity assets has significantly diminished the attractiveness of gold as a portfolio allocation. Our team's calculations indicate that the strengthening of the US dollar index, coupled with a 10% rise in the S&P 500, contributed to the 10% drop in gold prices; the remaining decline was entirely due to the liquidation of speculative positions in the precious metals market.

The disturbances are all temporary, and the long-term support logic for gold remains intact.

Analysts say the various factors suppressing gold prices are only short-term shocks, with three major structural advantages remaining solid: persistently high inflation, an uncertain global monetary policy outlook, and countries' continued efforts to diversify their foreign exchange reserves. As geopolitical tensions in the Strait of Hormuz gradually ease, long-term driving forces will once again dominate gold price movements.

Institutions categorize inflation and reserve adjustments as long-term variables with a slow-release effect, which are unlikely to offset the pressure from the dollar and yields in the short term during a geopolitical crisis.

Data calculations show that every 1 percentage point increase in inflation will correspondingly drive gold prices up by 5%. The inflationary pressures stemming from the previous surge in energy prices due to the Iranian situation will continue to benefit gold in the medium to long term. The current fair value of gold is estimated at $4150 per ounce, and gold prices have the potential for recovery once the conflict eases.

We maintain our original target price and continue to recommend gold mining stocks.

Barclays predicts that the US dollar will return to a downward trend, central bank gold purchases will stabilize, and high energy prices will continue to support inflation. These multiple positive factors will collectively support higher gold prices. The institution has not lowered its original price forecast, remaining bullish on gold prices to $4791/oz in 2026 and $4900/oz in 2027, while also noting that a slight short-term pullback is possible before the market recovers.

In addition to directly investing in physical gold, the research report recommends investing in several leading gold mining companies, including Endeavour Mining, Hotchhild Mining, Fresnillo, Newmont Mining, and Agnic Eagle Mining. Analysts stated that although gold prices are experiencing significant short-term volatility, gold should rightfully enjoy a valuation premium in the current environment, making it a valuable medium- to long-term investment.

Overall , the recent decline in gold prices was primarily driven by short-term financial events fueled by geopolitical factors, and there is no underlying logic of long-term deterioration in fundamentals. As tensions in the Middle East ease, the pressure on gold prices from the dollar and yields will gradually subside. Coupled with continued inflation and central bank gold purchases, the medium- to long-term upward trend in gold prices is unlikely to change.


Spot gold daily chart source: EasyForex

At 11:47 AM Beijing time on June 17, spot gold was trading at $4331.69 per ounce.