Gold prices have swung sharply in recent weeks as a surge in energy costs clouded expectations for interest-rate cuts and raised the risk that major central banks may consider further tightening.

But analysts argue that the volatility will not undermine gold’s longer-term appeal as a safe-haven asset. Based on historical precedent and the accelerating fragmentation of the US-dollar centered international monetary system, they remain constructive on the future trajectory for gold prices.

Spot gold fell below $4,100 per ounce on Monday, hitting its lowest level this year, and wiping out its year-to-date gains before rebounding over the next two days. On Wednesday, prices briefly recovered above $4,600.

The selloff gathered pace after damage to energy infrastructure triggered a sharp hawkish repricing in global interest rates, said Tang Yuxuan, Asia head of rates and FX strategy at J.P. Morgan Private Bank.

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A stronger greenback and higher global rates have put pressure on gold prices, she said, adding that the metal often declines alongside other assets during periods of deleveraging.

Despite the decline, Tang said “gold’s geopolitical hedge function remains intact” as its prices had initially surged above $5,400 an ounce when the Middle East conflict escalated.

If tensions persist and energy prices remain elevated, downside risks to global growth could intensify, she said. In that scenario, markets may shift their focus from inflation to recession risks — “an environment in which gold’s safe-haven properties could once again come to the fore”.

“We continue to view gold, appropriately sized, as a useful portfolio diversifier with low correlation to stocks and bonds over time,” Tang said, maintaining a year-end forecast of $6,000-$6,300 per ounce.

In a separate research note, China International Capital Corp said the current price correction could enhance gold’s longer-term allocation value.

“Regardless of how the situation in the Middle East evolves, it’s expected to accelerate global multipolarization and deepen fractures in the dollar-dominated monetary system, (thereby) reinforcing gold’s appeal as a portfolio hedge in a de-dollarizing world,” the investment bank said.

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Moreover, despite the recent hawkish signals, CICC said if conflict-induced economic slowdowns intensify, the US Federal Reserve’s room for tightening could narrow, making it difficult for real interest rates to rise.

Reviewing 12 major conflicts in the Middle East since 1970, CITIC Securities said gold’s immediate gains following the outbreak of the Gulf hostilities have been typically modest, but over the medium term, or measured over around six months, prices have risen by an average of 10 percent.

The precious metal posed an average half-year gain of 34 percent when three of five factors were supportive — whether oil is involved, pre-war expectations, the pace of conflict, dollar credibility and liquidity. While the first three factors remain uncertain this time, the brokerage said, over the longer term, continued liquidity easing and weakening dollar credibility will support gold prices.

Fan Shaokai, head of Asia-Pacific (ex-China) and global head of central banks at the World Gold Council, said at a mining event in Canberra on Tuesday that more central banks are expected to buy gold this year as they seek to hedge against de-dollarization and geopolitical risks.

“A phenomenon observed over the past few months is that new central banks, or those that have been absent from the gold market for a long time, are beginning to enter the gold market,” he said. “I believe this trend may continue until the end of 2026.”

However, CICC cautioned against overestimating the momentum behind central banks’ buying. While the correlation between their purchases and gold prices have increased, the investment bank said the buyers have been mainly emerging markets and developing economies, particularly those with non-floating exchange rate regimes.

By contrast, advanced economies, which face less need for currency intervention and tend to maintain relatively stable reserve structures, have shown limited appetite for increasing gold allocations. Some even reported modest reductions in their holdings, CICC added.

Contact the writer at irisli@chinadailyhk.com