Gold has failed the test

• Oil prices might be higher for longer.
• The gold bubble has burst.

The US dollar quickly recovered from the blow it took from central banks. The greenback recouped most of its losses against the majors. Despite regulators’ readiness to raise rates, the conflict in the Middle East shows no sign of ending. Donald Trump has issued a 48-hour ultimatum to Iran, threatening to bomb the country’s energy infrastructure if the Strait of Hormuz is not opened. However, Tehran is unlikely to bow to the US president’s demands.

The Middle East is increasingly resembling Ukraine. In February 2022, investors also expected the conflict in Eastern Europe to be short-lived. Their views then changed, and the US dollar rose by 15% over the next three months. Since the start of this war, the USD index has risen by just 2%. The potential for a rally in the US currency is still huge.

Oil prices are rising faster than they were four years ago. Meanwhile, Goldman Sachs has raised its forecast for the average Brent price to $85 per barrel in 2026 for the second time in two weeks. According to the bank, high prices are here to stay. It expects the Strait of Hormuz to maintain its throughput capacity at 5% of pre-war levels for six weeks. After that, it will take a month to restore oil transport volumes to their previous levels.

The US has lifted sanctions on Iranian oil, which, according to the Treasury Department’s estimates, will allow around 140 million barrels to be released onto the market, playing on the side of the bears. Iran is on the bull’s side right now, claiming it does not have as much oil stranded at sea as is commonly believed.

Gold has been the main casualty of the conflict in the Middle East, losing around 14% of its value so far. Gold is considered a safe-haven and a hedge against inflation, but recent geopolitics has increased inflation risks, pushing up the likelihood of rate hikes, not cuts, as before March. From another angle, Gold simply failed to pass the safe-haven test, falling victim to speculative trading. The rapid rise in the precious metal’s price in 2025 and early 2026 led to an overcrowded market, and now the conflict has burst the inflated bubble.

The FxPro Analyst Team