Recent analysis from TD Securities strategist Bart Melek has shed light on the factors driving the recent decline in gold prices, attributing much of this downward trend to the Iran-driven oil shock, escalating inflation expectations, and a strengthening US dollar. These elements collectively suggest a prolonged period of tighter monetary policy from the Federal Reserve, putting pressure on gold despite ongoing geopolitical tensions.
Melek identifies strong long-term support for gold in the range between $4,288 and $4,000 per ounce. He posits that once the current conflicts and inflationary pressures related to oil subside, gold is likely to regain its bullish momentum, with projections suggesting it could rise to over $5,200 by the end of 2026.
In his commentary, Melek states, “Gold’s pullback is very much driven by the Iran-related oil shock, higher inflation expectations, and a potential elevated interest rate environment.” He explains that rising crude oil prices, along with a firmer US dollar and increased expectations for a tighter monetary policy, have contributed to the recent downturn in gold, even as geopolitical risks remain elevated.
Melek emphasizes a likely path toward $5,200 per ounce for gold, contingent upon the resolution of the conflict and a reduction in oil-induced inflationary pressures. He anticipates that the Federal Reserve may shift its focus back toward maximizing employment, a pivot that could bring about lower yields and a softer dollar. This environment, combined with resurgent demand from investors and central banks, could reignite the bullish trend for gold after a potential testing of the noted long-term support levels.
Furthermore, he notes that if crude oil prices were to spike to $150 or more per barrel, it could push gold down to the $4,288–$4,000 range, presuming the Fed maintains a relatively restrictive stance in response to inflation.
In conclusion, Melek believes that the eventual easing of economic and funding pressures linked to the Iran conflict will serve as an upside catalyst for gold. Lower inflation expectations along with a Fed policy shift aimed at rectifying the economic repercussions from the existing supply shocks in energy and other key commodities are also expected to contribute positively to gold’s trajectory, potentially leading it to new record highs in the future.
