Gold (XAUUSD) Price Forecast: Gold Rally Targets $3,500 as Geopolitical Risk Grows

Gold Prices Surge as Israel-Iran Conflict Fuels Safe-Haven Demand

Gold prices climbed on Friday to their highest level since late April, supported by escalating geopolitical tensions between Israel and Iran. The renewed Middle East conflict has reignited safe-haven demand, pushing spot gold to $3,444.50 in London.

At 10:37 GMT, XAU/USD is trading $3415.68, up $29.10 or +0.86%.

Investors rushed to gold after Israel launched airstrikes targeting Iran’s nuclear and ballistic missile infrastructure, killing high-ranking Iranian military officials. Iran responded by firing roughly 100 drones toward Israel, further heightening concerns about a prolonged military confrontation. Markets were rattled by the possibility of broader regional involvement and potential disruptions to global oil supply, with crude futures briefly spiking as much as 13% before paring gains.

How Are U.S. Treasurys and the Dollar Reacting to the Conflict?

Initially, the safe-haven bid extended to U.S. Treasury markets, pushing yields down early in the session. However, by mid-morning London time, yields had reversed course. The 10-year yield rose to 4.373%, up 1.6 basis points, while 2- and 5-year yields gained around 2.1 basis points. The turnaround suggested that markets are recalibrating expectations for Fed rate cuts in light of geopolitical risks.

Meanwhile, the U.S. dollar rallied sharply after hitting a three-year low the previous day. The dollar index climbed 0.42% to 98.33, driven by renewed risk-off sentiment. Gains extended even against other typical safe-haven currencies, with the dollar up 0.23% against the Swiss franc and 0.28% against the Japanese yen. ING analysts noted that the conflict gave the “oversold and undervalued dollar” a much-needed catalyst for a rebound.

Physical Demand Falters in Asia Despite Rising Bullion Prices

Even as paper gold markets gained traction, physical demand weakened across key Asian markets. In India, prices surged above the symbolic 100,000-rupee level, sharply curbing consumer buying. The disconnect between strong institutional flows and retail demand highlights how geopolitical risks, rather than physical consumption, are currently driving price action.

Key Technical Levels in Focus as Gold Approaches Record Highs

Spot gold has cleared swing resistance at $3,403.63 and $3,435.06. If the current upside momentum holds, a test of the all-time high at $3,500.20 appears likely. Immediate support is seen at the 50% pivot of $3,310.48, followed by the 50-day moving average at $3,285.50, which continues to offer trend support since the start of the year.

Gold Prices Forecast: Bullish Momentum Likely to Extend

With geopolitical tensions escalating, gold remains well-bid on safe-haven flows. Rising Treasury yields and a rebounding dollar have not derailed the rally, underlining the strength of current demand. As long as risk sentiment remains fragile and gold stays above key support at $3,285.50, the path toward a retest of the $3,500.20 high remains intact. The gold prices forecast remains bullish in the near term.

More Information in our Economic Calendar.