Gold breaks through the consolidation range, returning to safe-haven pricing at the core

On February 23, spot gold broke through the upper end of the February trading range at $5,200 per ounce, marking three consecutive weeks of gains. The recent rally in gold is mainly driven by risk aversion sentiment. First, the Middle East situation has significantly escalated, with U.S.-Iran confrontation shifting from diplomatic pressure to actual military deployment. The U.S. is assembling two aircraft carrier groups around the Arabian Sea and the Strait of Hormuz — the largest deployment since the early 2000s. Iran responded with live-fire exercises, briefly closing the Strait of Hormuz. Trump set a “10 to 15 days” negotiation deadline, causing market expectations of limited military conflict in the Middle East to rise rapidly.

Secondly, on February 20, the U.S. Supreme Court ruled that Trump’s global tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unconstitutional. In response, the U.S. invoked Section 122 of the Trade Act of 1974 to reimpose a 10% tariff globally (effective February 24, with a 15% tariff timetable yet to be determined). However, this policy can only last for 150 days, and whether new tariffs will be introduced or whether they will gain Congressional support remains highly uncertain.

Amid these dual uncertainties, gold prices strengthened significantly. The U.S. dollar index temporarily weakened, U.S. asset risk premiums increased, and precious metals became a primary vehicle for hedging policy risks and geopolitical shocks. Meanwhile, bullish options structures are active, implied volatility has risen, and structural hedging mechanisms have further amplified price elasticity.

At the same time, some micro changes have appeared in the fundamentals of gold. Russia sold 300,000 ounces of gold (9.33 tons) in January, and internal Kremlin memos indicate Russia is considering returning to the U.S. dollar settlement system as part of ending the Russia-Ukraine conflict agreement. Additionally, global central bank gold purchases plummeted to 22 tons by December 2025, well below the 52 tons average over the past 12 months.

Strategic Reserve Allocation Narrative Temporarily Cools, Gold Returns to Traditional Safe-Haven Pricing Framework

Four years ago today (February 24), the Russia-Ukraine conflict erupted. Subsequently, Russia’s foreign exchange reserves were frozen, and de-dollarization by central banks and strategic reserves became the core logic of this gold bull market. Central banks worldwide (especially emerging markets) view gold as a neutral collateral independent of any government credit, used to hedge against the weaponization of the dollar system. This narrative has elevated gold from a traditionally interest rate-sensitive asset to a quasi-sovereign asset with strategic reserve attributes.