LAHORE: Gold prices rebounded on Wednesday after a nine-session decline that stripped more than 20% from the metal's value. Easing oil prices and tentative signs of Middle East de-escalation steadied sentiment following one of the sharpest corrections in recent months.
Spot gold rose nearly 2% to $4,551.50 an ounce. US gold futures for April delivery climbed more than 3% to $4,565.60. Prices had fallen from around $5,200 to near $4,100 earlier in the week.
Crude markets drove the recovery. Brent fell about 5% and West Texas Intermediate dropped roughly 4% as fears over supply disruptions through the Strait of Hormuz, a critical global shipping route, eased.
President Donald Trump said the United States and Iran were "in negotiations." Iranian officials later denied direct talks were underway, according to AFP.
Gold's safe-haven status offered little protection during the selloff. Rising oil prices had pushed inflation expectations higher, prompting investors to reassess the monetary policy outlook.
Markets began pricing in a prolonged period of elevated Federal Reserve rates. Bond yields climbed. The US Dollar Index strengthened. Both factors weigh on gold by eroding its appeal against yield-bearing assets and raising its cost for holders of other currencies.
The scale of the decline went beyond macroeconomic forces alone.
The Head of Research at Floret Capitals, Talha Naveed, said the downturn reflected converging pressures across energy markets, investor positioning, and physical gold trade flows. It was not, he said, a straightforward response to geopolitical developments.
Disruptions in physical gold markets added further pressure. In Dubai, a key global trading hub, supply chain interruptions and reduced activity led to localized price dislocations. Physical gold traded at discounts in some regions.
Falling equity markets compounded the selloff. Margin calls forced institutional investors to liquidate gold holdings (considered among the strongest-performing assets over the past year) to raise cash and rebalance positions.
"That profit-taking accelerated downside momentum despite gold's safe-haven status," Naveed said.
He also cited technical factors. Gold had entered overbought territory after an extended rally. The geopolitical shock acted as a catalyst for a correction toward key long-term support levels, not the start of a new downward trend.
Major financial institutions maintained bullish longer-term outlooks. Goldman Sachs said the pullback was consistent with historical patterns tied to rising rate expectations. Bank of America projected gold could reach $6,000 per ounce within 12 months. UBS said prices could climb further under sustained geopolitical stress.
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