Gold prices fell to a two-month low on Thursday, pressured by a stronger U.S. dollar and rising oil prices amid renewed geopolitical tensions between the U.S. and Iran.

Spot gold dropped approximately 1.6% to $4,385.85 per ounce, while the most active U.S. gold futures contract declined 1.3% to settle at $4,389.70. This decline marked the lowest level for spot gold since March 26.

The sell-off in gold coincided with modest dollar strength. As gold is priced in dollars, a stronger greenback increases the cost for overseas investors, dampening demand.

Looking ahead, strategists at UBS maintained a bullish outlook for gold in a Thursday report. The bank noted that near-term pressure stemmed from market concerns that elevated energy prices, driven by the Iran situation, could force the Federal Reserve and other central banks to maintain tighter monetary policy. However, UBS expects gold prices to resume their upward trajectory as expectations for interest rate hikes subside.

UBS recently revised its year-end gold price target down to $5,500 per ounce from a previous forecast of $5,900.

Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, stated, "We remain positive on gold's outlook and view it as a portfolio diversifier. While short-term movements may be influenced by U.S.-Iran tensions, energy prices, U.S. Treasury yields, and dollar volatility, medium- to long-term support will come from central bank purchases, reserve diversification, high global debt levels, and the potential for the Fed to shift to an easing policy later this year."

Bank of America set a year-end target of $5,093 per ounce for gold, implying roughly 16% upside from Thursday's spot price. The bank also projected gold would pull back to $4,925 per ounce by the end of 2027.

Analysts at Bank of America noted in a Tuesday client report, "Gold had been overbought, yet overall market positioning remains light. After the surge in gold ETF inflows faded last autumn, prices have corrected. The macro backdrop, including unconventional U.S. economic policies, remains favorable for gold, leading us to believe there is room to raise our target."

The bank also highlighted risks, stating that sustained dollar strength, rising real interest rates, and increased supply from gold recycling could result in prices falling short of expectations.

Strategists at Capgemini Securities indicated on Tuesday that they are increasing their gold holdings, noting that gold prices remain highly correlated with oil prices.

The focus also turned to interest rate markets. Michael Field, Chief Equity Strategist at Morningstar, commented via email Thursday morning that the gold price drop was not sudden but the result of accumulating pressures.

He said, "Investors are worried that a prolonged U.S.-Iran conflict will only push inflation higher. Traditionally, gold is a hedge against inflation, but it yields no income. In a low-rate environment, investors didn't mind this. In an environment where rates are likely to stay higher and inflation is elevated, assets that generate yield become more attractive."

Doubts over a potential U.S.-Iran peace deal reignited inflation concerns, pushing government bond yields slightly higher in the U.S., Europe, and Japan on Thursday. Risks to shipping through the critical Strait of Hormuz have kept oil prices elevated during the conflict, fueling fears of broader price increases.

Silver also faced pressure in Thursday trading. Spot silver fell 2.4% to $72.85 per ounce, while silver futures dropped 2.4% to just above $73 per ounce.

Both gold and silver experienced historic rallies in 2025, gaining 66% and 135%, respectively. However, volatility increased for both precious metals in 2026, with silver futures posting their largest single-day drop since 1980 in late January of this year.

In early Thursday trading, spot platinum declined 1.7% to $1,884.95 per ounce, and palladium fell 1.7% to $1,366.70 per ounce.

Daniel Hynes, Senior Commodity Strategist at ANZ, analyzed in a series of reports this week that the renewed conflict in the Middle East, which disrupted interest rate expectations, combined with a stronger dollar, triggered the current precious metals sell-off.

He stated on Friday, "Gold fell for a second day on concerns that Middle East tensions will boost inflation and keep interest rates higher for longer. Even signs of a potential peace deal have not eased inflation anxiety. Concurrently, recent sharp increases in U.S. food prices, driven by severe weather, tariff policies, and a decline in cattle inventory, have further heightened market concerns."

The U.S. is scheduled to release the April Personal Consumption Expenditures (PCE) price index on Thursday, a key inflation gauge for the Federal Reserve. A Dow Jones survey indicates economists expect a 0.5% monthly increase and a 3.8% annual rise.