Gold has been under significant pressure since the start of the Iran war. After cracking 20% from its recent high of $5,602, gold has recovered somewhat and is now trading around $4,500 — the same level it was at in January. As of May 27, the year-to-date return for gold stands at a modest 3%.
Gold prices at $4,400 remain nearly 15% below levels seen at the start of the Middle East conflict, while silver at $74 is nearly 20% lower. The common thread: concerns over an energy-driven inflation shock have strengthened expectations that major central banks may keep monetary policy tighter for longer — and that is weighing heavily on both metals.
What Is Holding Gold Back?
Gold is currently facing headwinds from multiple directions — the uncertain outcome of the Iran war, rising oil prices, surging inflation, higher bond yields, a stronger US dollar, and the prospect of a ‘higher for longer’ interest rate scenario from the US Fed.
At the centre of all these factors is the Iran war — and its resolution, or lack thereof, will likely determine the direction of gold prices for the rest of the year.
“As long as the Strait of Hormuz remains disrupted, energy costs stay elevated, inflation stays sticky, and the case for tighter policy remains intact, supporting real yields and the dollar, headwinds will exist for non-yielding assets like gold,” says Kaynat Chainwala, AVP Commodity Research, Kotak Securities.
What Are the Top Institutions Predicting?
The big banks remain broadly bullish on gold for H2 2026 — but several have lowered their price targets to reflect the current reality.
JP Morgan has lowered its 2026 average gold price forecast from $5,708 per ounce to $5,243 per ounce. However, the bank is maintaining its base case year-end target of around $6,000 per ounce, citing an expected re-acceleration in demand in the second half of 2026. From current levels of $4,500, gold would need to rise 33% to meet that target.
The bank’s long-term thesis — focusing on fiscal risks, currency debasement, geopolitical fragmentation, and US policymaking uncertainty — remains valid, but is described as being ‘on hold’ until the Iran conflict is resolved.
Earlier, at the end of March, Goldman Sachs analysts retained their bullish view on gold despite the selloff that month, forecasting the precious metal may reach $5,400 per ounce by the end of 2026. More recently, in May, the same Goldman Sachs analysts said in a written note that central banks are expected to step up gold buying — helping prices recover by year-end, reports Bloomberg.
Morgan Stanley has taken a more cautious view, lowering its H2 2026 gold price forecast from $5,700 per ounce to $5,200 per ounce. The bank cited three key reasons for the downgrade: reduced central bank purchases, with an average of just 31 tonnes per month in early 2026 compared to 50 tonnes per month in 2025; negative ETF flows, where funds sold 90 tonnes in March after earlier buying 150 tonnes; and a technical decline below significant moving averages that triggered increased selling pressure.
UBS has lowered its gold price forecast for year-end 2026 to $5,500 per ounce from $5,900 due to ongoing yield and USD pressures. According to UBS, the demand for ETFs and futures has weakened, with current stabilization in flows insufficient to resume earlier strong growth.
The Bottom Line
The future of gold prices in H2 2026 largely depends on the outcome of the Iran war. A resolution may alleviate persistent inflation and prolonged high-interest rates, supporting recovery forecasts from JP Morgan, Goldman Sachs, and Morgan Stanley. Until then, gold prices are expected to stay within a stable range, awaiting a geopolitical catalyst.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Gold and silver prices are subject to market risk and may fluctuate significantly. Forecasts cited from JP Morgan, Goldman Sachs, and Morgan Stanley reflect those institutions’ views and are subject to change. Readers should conduct their own due diligence or consult a qualified financial advisor before making any investment decisions.