Gold prices to hold at support level as two factors limit upside

Gold investors are substantially cutting back on bullish positions, a move driven by the escalating U.S.-Iran conflict which is threatening to reverse recent progress in curbing inflation by driving up oil prices. This shift reflects a growing caution in the commodities market.

Analysts at TD Securities point out that the market's increasing expectation of a Federal Reserve interest rate hike by the end of 2026 is also a key factor. Higher hedging costs, increased opportunity costs associated with holding non-yielding assets, and a strengthening U.S. dollar are collectively expected to keep gold prices anchored near the support level of $3900 per ounce. This environment suggests that speculative long positions may see further reductions.

The downward pressure on precious metals extends to silver as well. Fund managers have reduced their long positions in silver, anticipating that weak industrial and investment demand will weigh on prices. Consequently, both gold and silver holdings are likely to decline as investors reassess their portfolios in response to evolving economic and geopolitical conditions.