Gold prices rebound from previous session’s hefty drop, helped by weaker dollar

Gold prices gained on Wednesday, following a hefty fall in the previous session, as a weaker dollar prompted investors to dive back into the yellow metal’s safe-haven status. The escalating conflict in the Middle East remained at the top of investors’ minds.

At 14:14 ET (19:14 GMT), Spot gold rose 0.8% to $5,128.80 an ounce, and U.S. Gold Futures gained 0.4% to $5,143.41/oz.

The yellow metal dropped 4.5% on Tuesday, driven by a surge in the dollar and rising U.S. Treasury yields.

"Gold saw a sharp retracement of its short-term uptrend yesterday, supporting the formation of a short-term trading range. This drawdown has triggered an overbought downturn in the daily stochastics, while the daily MACD has pinched toward a ‘sell’ signal in a whipsaw lower. This keeps a test of 50-day MA support near $4,760/oz in play in the coming days," Fairlead Strategies said.

"A lasting buying opportunity will likely come with more meaningful improvement in our intermediate-term gauges. Secondary support sits near the bottom of the daily cloud around $4,490/oz," Fairlead added.

Gold helped by stabilizing dollar 

The US Dollar Index was slightly lower on Wednesday after jumping nearly 1.5% in the last two days - reaching six-week highs overnight, buoyed by haven demand and reduced expectations for Federal Reserve rate cuts in the coming months.

A stronger dollar makes gold more expensive for holders of other currencies, dampening international demand.

Ongoing geopolitical tensions in the Middle East lent support to bullion. The conflict between the U.S. and Iran has widened after coordinated U.S. strikes on Iranian-linked targets drew retaliatory threats from Tehran, stoking fears of broader regional instability. 

U.S. Secretary of War Pete Hegseth told reporters on Wednesday that Washington could carry out its assault on Iran for as long as it wants to. He also touted the success of joint American and Israeli attacks, including the sinking of an Iranian warship in the Indian Ocean.

Investors have grown increasingly concerned that the confrontation could disrupt energy supplies and draw in other regional powers, although reports on Wednesday indicated that Iran was looking for an end to the conflict. Iran later denied those reports.

Meanwhile, NATO forces intercepted a ballistic missile fired from Iran toward Turkish airspace, marking the first instance of the alliance defending a member state from an Iranian projectile since hostilities between the U.S., Israel and Iran began last week.

"Geopolitics continue to provide marginal support, but macro forces dominate near‑term price action. Much now depends on the duration of the Middle East conflict. Prolonged escalation would favor gold, while stabilization would leave it exposed to macro headwinds," analysts at ING said in a note.

Central bank demand remains a key structural pillar, but momentum softened at the start of the year. 

"According to the World Gold Council, central banks bought a net 5 tonnes of gold in January. This is well below the 2025 monthly average of 27 tonnes and the weakest month since late 2024. Volatile prices and seasonal factors may have contributed to the slowdown. Importantly, though, the demand base broadened, with new buyers emerging," ING added.