Spot gold prices rallied in London trading on Friday, February 20, 2026, breaking through the $5,000 psychological barrier. The precious metal gained 0.7% to reach $5,032.49 per ounce by 0941 GMT, though it remained positioned for a modest 0.2% weekly loss. The session's upward momentum was primarily fueled by escalating geopolitical friction between the United States and Iran, coupled with a noticeable pullback in European sovereign bond yields.
Market Drivers: Geopolitics and Monetary Policy
Investor focus was squarely on renewed diplomatic strains. Reuters reported that U.S. President Donald Trump issued a threat to Iran, warning of "really bad things" if the nation did not agree to a "meaningful" nuclear deal within a 10 to 15-day window. Such geopolitical uncertainty traditionally drives capital toward perceived safe-haven assets like gold, as investors seek shelter from potential market volatility.
Concurrently, declining yields in Europe provided a fundamental tailwind. Gold, which offers no inherent yield, becomes more attractive to hold when the opportunity cost of forgoing interest-bearing assets decreases. This dynamic was in play as European yields softened. Market participants were also awaiting the release of the U.S. Personal Consumption Expenditures (PCE) price index data later in the day, a critical gauge of inflation closely watched by the Federal Reserve.
Inflation Data and Rate Expectations
The upcoming inflation report carries significant weight for future monetary policy. A Reuters survey of economists projected a 0.3% monthly increase in the core PCE index for December, with the annual rate expected to edge up to 2.9% from November's 2.8%. Lou Crandall, chief economist at Wrightson ICAP, noted, "The year-on-year growth rate of the core has shown essentially no progress since mid-2024," highlighting persistent inflationary pressures.
Despite this, market expectations for an imminent Federal Reserve rate cut remained subdued. According to the Investing.com Fed Rate Monitor, traders priced in a 95% probability that the central bank would maintain its target rate in the 3.50%-3.75% range at its March 18 policy meeting. The odds of a 25-basis-point cut to 3.25%-3.50% stood at just 5%.
Precious Metals Complex and Related Equities
The rally extended across the precious metals spectrum. Silver, platinum, and palladium all traded firmly higher on Friday, with each metal set to secure weekly gains. In the mining sector, Lundin Gold and Eldorado Gold reported fourth-quarter profits that exceeded analyst expectations after markets closed on Thursday.
U.S. gold futures for April delivery showed even stronger momentum, advancing 1.1% to $5,052.70 per ounce. However, the broader environment presented headwinds. A robust U.S. dollar, hovering near a one-month peak, exerted pressure on dollar-denominated commodities throughout the week. Spot gold priced in Canadian dollars, for instance, was still headed for a weekly decline.
Global Context and Physical Demand
In Europe, investors parsed comments from European Central Bank officials. ECB President Christine Lagarde, in an interview with the Wall Street Journal, pushed back against speculation of an early departure, stating her "baseline" intention was to serve her full term.
Physical demand in key Asian markets offered little support at elevated price levels. Indian bullion dealers widened their discounts to $18 per ounce over official domestic prices, up from $12 the prior week, as volatile prices discouraged local buyers. Furthermore, major markets like China were closed for the Lunar New Year holiday, temporarily removing a significant source of demand.
Outlook and Key Risks
The immediate trajectory for gold faces clear countervailing risks. A hotter-than-anticipated U.S. inflation reading could prompt traders to reassess the interest rate outlook, potentially driving bond yields and the U.S. dollar higher—a typically negative combination for bullion. Additionally, any de-escalation in U.S.-Iran tensions could rapidly erode the metal's safe-haven premium.
The Bureau of Economic Analysis is scheduled to release the U.S. Personal Income and Outlays report, which includes the PCE price index, at 8:30 a.m. EST. The report will also contain rescheduled advance Gross Domestic Product (GDP) figures, providing a more comprehensive snapshot of the economic landscape that will inform trading decisions across asset classes.
