• Gold surged 5% in February to US$5,222/oz, delivering a powerful 20% year-to-date rally driven primarily by US dollar weakness
  • The World Gold Council forecasts the medium-term US dollar downtrend (DXY) to resume after a temporary bounce, creating a supportive environment for gold
  • Geopolitical risks, including the escalating US-Iran conflict and Strait of Hormuz disruptions, triggered immediate safe-haven buyin

               

 

Dec 2026 is a proj of 5.6K/oz, Sources: World Gold Council, Equity Axis  

 

Harare- Gold prices have continued their relentless climb, reaching US$5,222 per ounce by late February 2026, marking a 5% gain for the month and a remarkable 20% year-to-date increase, according to World Gold Council Gold

On the 13th of March 2026, spot gold traded around US$5,090–5,120 per ounce, consolidating near record highs after brief volatility triggered by Middle East tensions, but the medium-term trajectory points firmly higher amid a weakening US dollar, persistent geopolitical uncertainty, and strong Asian buying interest.

The February rally was driven by dip buyers stepping in aggressively, particularly during Asian trading hours, where elevated volumes on the Shanghai Futures Exchange and robust physical demand helped cushion an early-month pullback.

The World Gold Council's Gold Return Attribution Model (GRAM) attributes much of the positive return to a weaker US dollar, especially against emerging market currencies, and softer 10-year US Treasury yields, which lowered the opportunity cost of holding non-yielding gold. A sharp drop in implied volatility mid-month could have dragged prices lower, but strong Asian inflows prevented a deeper correction, resulting in a large positive residual in the model that captures unmodeled factors like regional physical demand.

Performance in local currencies varied sharply. In India and China, sharp appreciation of the rupee and renminbi following tariff relief and currency strength caused local gold prices to fall 3.5% and 1.3%, respectively, tempering retail enthusiasm despite underlying dollar gains. Elsewhere, returns remained strongly positive, gold rose 5.7% in yen, 6.4% in pounds, and 5.9% in Turkish lira, reflecting currency-specific dynamics and safe-haven flows.

ETF flows mirrored this regional divergence. Global gold ETFs added US$5.3 billion in assets during February which is 26 tonnes, led by North America and Asia, while Europe saw outflows of US$1.8 billion (-13 tonnes), likely due to profit-taking after January's surge. Managed money net long positions on COMEX contracted early in the month before a modest recovery, signaling tactical repositioning amid volatility.

Looking forward, the medium-term downtrend in the US dollar index (DXY) is likely to resume after a near-term bounce fuelled by positive US economic surprises and futures positioning.

The case for sustained dollar weakness rests on several pillars which are the US dollar and equities remaining expensive relative to history and peers, the "double reward" for foreign investors (strong US equities plus a strong dollar) is fading, with Europe and Japan offering compelling alternatives, previous dollar bear markets have been long, front-loaded, and accompanied by relative equity weakness, the current administration's reshoring policies align with a weaker currency, and weaponisation of the dollar since the Ukraine invasion has prompted central banks and investors to diversify away from US exposure.

The US remains expensive on both Real Effective Exchange Rate (REER) and price-to-sales metrics compared to Eurozone and Japan averages, reinforcing the rationale for rotation. If outflows accelerate, they could create a reinforcing loop of currency depreciation and weaker prospective returns, amplifying the trend.

Historical patterns show dollar bear markets often coincide with underperformance in US equities relative to global peers, suggesting potential for sharp initial moves.

For gold, these conditions are supportive. Dollar weakness, elevated policy and geopolitical uncertainty, volatile capital flows, and ongoing central bank diversification all favour the yellow metal.

However, risks remain. Elevated prices may deter some investors, and if financial flows drive stronger growth in Europe or Japan, gold could face relative headwinds in those markets, as evidenced by February's European ETF outflows amid profit-taking.

The latest escalation in Middle East tensions, marked by US-Iran conflict intensification, strikes, and disruptions to Iraqi oil terminals triggered an immediate market reaction on March 2, with oil prices climbing, the dollar rallying briefly, and gold bouncing nearly 5% over two sessions.

Historically, gold responds positively in about two-thirds of major geopolitical risk spikes, though returns vary widely (+8% to -3%) in the subsequent two weeks. The commentary views the dollar bounce as short-lived, with resumption of the downtrend providing further tailwinds for gold.

As of mid-March 2026, gold holds above US$5,090 amid ongoing uncertainty, with analysts eyeing potential pushes toward US$5,000+ by year-end if dollar weakness persists and safe-haven demand endures.

The World Gold Council emphasizes that while high prices raise concerns, structural drivers, central bank buying, investor diversification, and macro uncertainty remain intact, positioning gold as a key strategic asset in this environment.

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