**Gold Demand Amid Economic Uncertainty** Geopolitical tensions, like the US-Iran conflict, may boost gold as a safe-haven asset. Iran’s leader has warned about potential regional conflicts, coinciding with a growing US military presence in the area. Central bank demand could further support gold. In 2022, central banks bought 1,136 tonnes of gold, worth around $70 billion, making it the highest yearly purchase ever recorded. Countries like China, India, and Turkey are quickly increasing their gold reserves. Gold usually rises when the US Dollar and US Treasuries fall. It serves as a diversification tool during instability or recession fears. Interest rates and the behavior of the USD influence gold prices, with a stronger dollar generally keeping prices in check. Reflecting on 2025, gold prices fell from historic highs as political stability signs emerged in the United States. Kevin Warsh’s nomination to lead the Federal Reserve was viewed as a safe choice that calmed markets, pressuring gold prices. This recent drop to the $4,780 level should be seen in this context. **Current Economic Outlook** As of February 2nd, 2026, new economic data is changing the landscape. The latest US ISM Manufacturing PMI report, released last month, showed a figure of 48.2, marking the fifteenth month of contraction in the manufacturing sector. This ongoing weakness raises concerns about a broader economic slowdown, which typically boosts gold’s appeal as a safe-haven asset. This bleak economic outlook is shaping expectations for monetary policy, with the market now seeing over a 70% chance of a Federal Reserve interest rate cut by June. Gold becomes more attractive as rates are expected to fall since it does not yield interest. This is a sharp contrast to the hawkish environment we faced a couple of years ago. Geopolitical tensions, especially between the US and Iran, linger in the background, providing steady support for gold. Although there has been no major conflict yet, the ongoing risk of escalation maintains a safety net for gold prices. Any regional flare-up could lead to a quick rush to safety, benefiting gold. We also need to consider ongoing demand from global central banks, which has become a crucial support for the market. Following record purchases in previous years, central banks added another 1,037 tonnes in 2023, and this strong trend continued through 2025. This consistent accumulation by official institutions, especially from emerging economies, shields the precious metal from some downward pressures. Given these mixed signals—the stability of last year versus new economic fears—we expect increased volatility in the coming weeks. For derivative traders, this environment presents a good opportunity for long-dated call options or bull call spreads to position for potential upside while managing risk. The higher implied volatility also creates chances for those willing to sell cash-secured puts at key technical support levels. The direction of the US Dollar will be crucial, as it has an inverse relationship with gold. An expected shift to lower interest rates by the Federal Reserve is likely to weigh on the dollar. A weaker dollar makes gold cheaper for holders of other currencies, which could further drive demand and push prices higher. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now