The ongoing gold selloff is the paradox that the market cannot stop arguing about.

The metal hit a record $5,602 per ounce on Jan. 29, then shed more than $1,100 in the span of sixty days — a 17% plunge that unfolded even as an active war raged in the Middle East.

With spot gold now trading near $4,629, UBS Global Wealth Management stated this week that “the decline in gold is likely to be relatively short-lived.”

Why Gold Fell Sharply Despite A War In The Middle East

The fall began with the Fed, not Iran. When the U.S.-Iran war began in late February and Brent crude subsequently surged past $112 per barrel, gold initially held firm.

The problem was what came next: $100-plus oil made inflation stickier, and the Federal Open Market Committee responded at its March 17–18 meeting by slashing its projected rate cuts for 2026 from three to just one.

Real 10-year Treasury yields climbed toward 2.08%. The U.S. Dollar Index pushed to its highest level since late 2022.

Gold and a surging dollar do not coexist well. A stronger greenback makes dollar-priced bullion more expensive for buyers holding euros, yen or yuan — exactly the international buyers who had powered the rally.

The safe-haven paradox that bewildered traders was, in fact, basic macro: when dollar strength dominates a crisis, cash and short-duration Treasuries absorb the safe-haven bid, not gold.

Chart: Gold Tumbled 17% From Its January’s All-Time Highs

What UBS Sees That The Selloff Doesn’t Change

The Swiss bank never moved its price target. UBS continues to see gold – as tracked by the SPDR Gold Shares (NYSE:GLD) – reaching $6,200 per ounce by mid-2026 — a 34% gain from current levels — citing rising U.S. debt, central bank diversification and structural supply constraints that it argues the selloff has not touched.

The Swiss bank’s optimism on gold rests on three structural forces that the selloff hasn’t dislodged.

First, Fed easing.

UBS projects two 25-basis-point rate cuts by September 2026. Lower real interest rates reduce the opportunity cost of holding gold — effectively making a non-yielding asset more attractive relative to Treasuries.

The bank notes that a firmer dollar and hawkish Fed represent the main downside risk, which it prices in its bear case at $4,600 — the current territory gold is approaching.

Second, central bank accumulation.

UBS expects central banks globally to purchase approximately 950 metric tons of gold in 2026, in line with 2025 levels. Poland’s recent decision to raise its gold reserve target from 550 to 700 metric tons signals a broader institutional shift.

China’s central bank extended gold purchases for 15 consecutive months through January 2026.

Third, record investment demand.

Global gold ETF holdings reached 4,171 tonnes in February 2026 — an all-time high — even as spot prices corrected. UBS analysts noted that hedge funds have modestly boosted net positioning in gold and that ETF investors, while trimming slightly earlier, have shown greater stability of late.

World Gold Council data shows that total 2025 gold demand exceeded 5,000 metric tonnes for the first time in history.

Bull Case $7,200. Bear Case $4,600. We’re Already There.

The upside case of $7,200 per ounce requires a sharp escalation in geopolitical tensions. The downside case of $4,600 assumes the Federal Reserve maintains a restrictive monetary policy stance.

At $4,630 today, gold is trading at the edge of that bear scenario — suggesting either the market has already priced in the worst Fed outcome, or the next catalyst breaks the range decisively.

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