Gold prices regained ground on Tuesday following an early session decline, as renewed tensions in the Middle East reignited concerns around rising inflation. While gold managed to climb back into positive territory, the metal continued to trade below the key $4,000 per ounce threshold, facing headwinds from a strong energy market and expectations of further Federal Reserve tightening.
Gold recovers but remains below $4,000
Spot gold initially dropped over 1% early Tuesday but later recovered, trading at $3,953 an ounce by 9:00 AM EST with a slight gain of 0.14%. Monday’s session had already helped bullion rebound from the more than one-year low reached last Friday. Nonetheless, gold is still about 29% below its January record high of $5,595 per ounce.
Market analysts pointed to the importance of the $4,000 level for investor sentiment, emphasizing that further gains may remain subdued unless macroeconomic conditions shift.
WGC slashes gold investment demand outlook
Investors closely tracked the latest report from the World Gold Council, a leading market development organization for the gold industry. The WGC highlighted a notable slowdown in physical investment demand, even as exchange-traded funds (ETFs) and central banks maintained interest in the metal.
The organization reduced its 2026 forecast for investment demand to 200 metric tons, cutting its previous projection of 400 tons in half. This revision reflected weaker bar and coin purchases, which dropped 19% to 268 tons in the third quarter compared to a year ago. Jewelry consumption also fell, down 17% to 313 tons, the lowest figure for any third quarter since 2000.
Bar and coin purchases as well as jewelry demand softened in Q3, pushing physical gold investment down 14% year on year to 479 tons, marking significant pressure within retail demand segments.
Despite these declines, gold-backed ETFs recorded unexpected inflows of 211 tons during the third quarter, counterbalancing outflows seen in previous periods caused by higher bond yields and a robust dollar. Central bank gold purchases surged 42% year over year, reaching 321 tons. The WGC now predicts that full-year central bank buying will at least match the 848 tons accumulated in 2025.
Mini dictionary: World Gold Council (WGC), an international organization that promotes understanding and development of the gold market by providing research, insights, and advocacy on behalf of the gold industry.
| Metric | Q3 2025 | Q3 2026 |
|---|---|---|
| Gold investment demand | 557 tons | 479 tons |
| Bar and coin purchases | 331 tons | 268 tons |
| Jewelry consumption | 377 tons | 313 tons |
| ETF inflows | – | 211 tons |
| Central bank purchases | 226 tons | 321 tons |
Oil price swings and inflation outlook
Crude oil prices fluctuated on Tuesday after dropping more than 7% in the previous session. Brent crude rose more than 1%, and West Texas Intermediate (WTI) gained 1.5% early in the day, before both benchmarks slipped lower as the session progressed.
The moves followed reports of US military action on Iran’s Qeshm Island and statements from Iranian officials indicating that any agreement to resolve the conflict with Washington remains distant. Heightened energy prices are raising fears that inflation could remain elevated for longer, prompting traders to assign a 76% likelihood to a December interest rate hike, according to CME FedWatch data.
Higher oil prices are fueling speculation that the Fed may maintain high borrowing costs to manage persistent inflation, which could limit gold’s appeal as a non-yielding asset.
US dollar and midterm elections in focus
The US Dollar Index hovered around 101.8 on Tuesday, holding ground after Monday’s dip. Safe-haven flows into the greenback persisted as investors assessed ongoing geopolitical risks in the Middle East.
A stronger dollar typically makes gold more expensive for international buyers, capping demand amid prevailing uncertainty.
Meanwhile, investors are monitoring the US midterm elections, expected to determine the balance of power in Congress and affect the policy direction of the Trump administration. The WGC noted that greater Democratic control could be supportive for gold demand, however, the broader policy outcome remains unclear.
Analysts cautioned that a Democratic sweep may increase regulatory focus on artificial intelligence and technology infrastructure. Tim Waterer, chief market analyst at KCM Trade, suggested this increased scrutiny could trigger further declines in technology stocks, with possible ripple effects on gold as investors reposition to cover losses in other sectors.
