International gold prices fell to a two-month low on Thursday, pressured by a stronger U.S. dollar and higher oil prices amid renewed geopolitical tensions in the Middle East.

At 7:41 AM ET, spot gold was down approximately 1.5% at $4,388.32 per ounce. The most active U.S. gold futures contract settled 1.5% lower at $4,381.50 per ounce.

This decline pushed spot gold to its lowest level since March 26. A modestly firmer U.S. dollar increased the purchasing cost of dollar-denominated gold for global investors, triggering selling pressure.

However, UBS strategists reaffirmed their bullish stance on gold in a report issued Thursday. They noted that gold was under pressure due to market concerns that elevated energy prices, fueled by U.S.-Iran tensions, could force the Federal Reserve and other central banks to tighten monetary policy. Yet, they expect gold to regain upward momentum as expectations for interest rate hikes diminish.

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

"We remain positive on gold's outlook and continue to view it as a high-quality portfolio diversifier," said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management. "While short-term movements will still be influenced by U.S.-Iran developments, energy prices, U.S. bond yields, and dollar volatility, medium- to long-term factors such as central bank purchases, diversification of foreign exchange reserves, high global debt levels, and the potential for the Fed to shift to an easing policy later this year should support the gold price."

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

"Gold had become overbought earlier, yet overall allocation remains low," BofA analysts stated in a client note on Tuesday. "Prices corrected after the frenzy of continued ETF inflows seen last autumn subsided. Given a macro backdrop that remains broadly supportive for gold, including unconventional U.S. economic policies, we see upside to our target."

The BofA team also cautioned that risks to their forecast include a persistently strong dollar, rising real interest rates, and increased supply from recycled gold.

Strategists at Kepler Cheuvreux noted in a Tuesday report that they had increased their gold holdings, pointing out that gold prices remain highly correlated with oil prices.

Analyzing the sell-off, Michael Field, Morningstar's Chief Equity Strategist, explained in an email to CNBC on Thursday morning that the move was not sudden but the result of a gradual build-up of factors.

"Investors are worried that with the U.S.-Iran conflict dragging on, inflation will only move higher," Field said. "Traditionally, gold and other precious metals are seen as inflation hedges, but they are non-yielding assets. When rates are low, investors don't mind; but in a high-inflation environment where rates are likely to rise, they prefer assets that can provide steady income."

Uncertainty over whether the U.S. and Iran can reach a peace deal has reignited inflation concerns, pushing government bond yields in Europe, the U.S., and Japan slightly higher on Thursday. With the key Strait of Hormuz shipping lane largely shut down and oil prices staying elevated during the conflict, there are widespread fears of broader price pressures.

Silver also came under pressure in early Thursday trading. Spot silver fell 2.1% to $73.02 per ounce, while silver futures dropped 2.2% to $73.21 per ounce.

Both gold and silver recorded historic gains in 2025, rising 66% and 135% for the year, respectively. However, volatility increased significantly for both metals in 2026, with silver futures posting their largest single-day drop since the 1980s in late January this year.

In early Thursday trading, spot platinum fell 1.9% to $1,882.21 per ounce, and palladium dropped 3.1% to $1,347.99 per ounce.

Daniel Hynes, Senior Commodity Strategist at ANZ, analyzed in several reports this week that the current precious metals sell-off is primarily driven by the resurgence of conflict in the Middle East, uncertain interest rate prospects, and a stronger U.S. dollar.