Despite escalating geopolitical tensions in the Middle East, the selloff in gold has continued. Instead, investors have increasingly favored alternative safe-haven assets such as U.S. Treasuries and the U.S. dollar. If this market dynamic persists, gold prices could remain under downward pressure over the coming trading sessions.

A temporary ceasefire agreement had previously appeared possible between the parties involved in the Middle East conflict, raising hopes of restoring shipping through the Strait of Hormuz. However, tensions have escalated again after three commercial vessels were reportedly attacked. The United States subsequently launched a new round of military strikes against Iran and revoked Iran's authorization to publicly market its crude oil globally. As geopolitical risks intensified, U.S. President Donald Trump stated that the ceasefire between the U.S. and Iran had effectively come to an end, significantly reducing the likelihood of formal negotiations.

The renewed conflict has also driven up the geopolitical risk premium, with crude oil prices rising nearly 10% over the past two trading days. Markets are increasingly concerned that inflationary pressures could rebound in 2026, potentially prompting major central banks to maintain or even strengthen their tightening policies. This shift in the macroeconomic outlook has not been supportive of gold.

Although gold has traditionally been regarded as the ultimate safe-haven asset, recent months have shown a different pattern. During periods of heightened Middle East tensions, investors have increasingly preferred U.S. Treasuries and the U.S. dollar over gold.

In the bond market, the yield on the benchmark 10-year U.S. Treasury has climbed again, approaching the 4.6% level, while short-term Treasury yields have also risen sharply. Compared with non-yielding gold, higher-yielding government bonds have become increasingly attractive, leading investors to prioritize fixed-income assets during periods of geopolitical uncertainty.

The growing appeal of U.S. Treasuries has also strengthened demand for the U.S. dollar. On one hand, international capital has continued flowing into the Treasury market. On the other, escalating geopolitical tensions have increased demand for dollar liquidity, as the greenback remains the world's primary safe-haven currency during times of global uncertainty.

This trend is clearly reflected in the U.S. Dollar Index (DXY), which measures the dollar's performance against a basket of major currencies. Supported by rising Treasury yields and renewed geopolitical tensions, demand for the U.S. dollar has remained robust.

These two factors have created a double headwind for gold. Rising Treasury yields increase the opportunity cost of holding non-interest-bearing assets such as gold, while a stronger U.S. dollar makes gold more expensive for holders of other currencies, limiting its upside potential.

As a result, capital has continued flowing out of gold and into these alternative safe-haven assets. Should the Middle East conflict continue to boost demand for U.S. Treasuries and the dollar, gold is likely to face limited upside in the near term and could remain under sustained selling pressure.

Market Insight:

Although gold staged a temporary rebound in recent weeks, the long-term bearish trendline on the daily chart continues to dominate price action and remains the key technical structure that has guided the market for several months.

At present, there are no convincing bullish technical signals. As long as this bearish structure remains intact, it will continue to be the primary technical indicator to watch. If selling pressure persists in the short term, gold is likely to continue trending lower along this long-term downtrend line over the coming weeks.