The gold market has undergone a significant "stress test" following a full week of escalating conflict in the Middle East. On March 5, spot gold hovered near $5,150 per ounce, continuing a mild rebound from the previous day.

Beneath this surface of calm lies a week of dramatic swings. On Monday, the price surged past $5,400. The next day, it plummeted by 4.38%, briefly falling below the $5,000 mark. After a slight recovery on Wednesday, prices moved higher again today. Intense battles between bulls and bears have been fought at every key price level.

A market participant noted that rallies in safe-haven assets driven by geopolitical conflict are often short-lived. The true drivers of gold's direction are fundamental factors like inflation, interest rates, and the US dollar, alongside the conflict's own evolution. For investors, maintaining calm and rationality is crucial. As multiple institutions have cautioned, short-term volatility is likely to remain high, making position control and risk reduction particularly important.

**Weekly Recap: A Rollercoaster Ride for Gold** The past few trading sessions have been highly volatile for gold. Spurred by a sudden escalation in US-Iran tensions over the weekend, spot gold gapped up at Monday's open, briefly breaking above $5,419 an ounce to hit a new high since late January.

However, the narrative reversed sharply on Tuesday. Gold prices plunged from their highs, at one point dropping over 6% to $4,995 per ounce, ultimately closing down 4.38%, highlighting indiscriminate investor selling.

Since then, gold has continued its rollercoaster pattern, with the $5,100 level becoming a focal point for contention. On both Tuesday and Wednesday, international gold prices exhibited a pattern of rebounding during Asian hours only to fall sharply later in the day.

The same trader explained that as the conflict escalated, market sentiment became increasingly bullish towards gold and silver. This was reflected in rising prices for these metals and falling prices for risk-associated assets. However, a strong rebound in the US dollar index, combined with a rapid market focus shifting to potential inflationary pressures from surging oil prices, triggered a fierce sell-off in gold, leaving many investors who had bought at the peak suddenly holding losing positions.

CITIC Futures analysis suggests precious metals are currently in a tug-of-war between "safe-haven premium" and "interest rate expectation repricing." On one hand, persistent risks to shipping in the Strait of Hormuz continue to provide support from safe-haven buying. On the other hand, rising energy prices strengthen expectations of resurgent US inflation, leading to higher US Treasury yields and a stronger dollar, which in turn pressures the valuation of non-yielding assets like gold.

**Historical Context: Gold's Performance During Geopolitical Risk** A key question arises from the current volatility: how has gold historically performed during wartime?

According to CICC statistics, in the first week following the outbreak or escalation of past geopolitical conflicts, the median gains for WTI crude oil and COMEX gold were approximately 1.9% and 0.4% respectively, with a probability of rising around 61.5% for both.

However, conflicts in the Middle East, especially those involving oil supply, have often acted as accelerants for gold bull markets.

Tianfeng Securities research points to the Fourth Middle East War in 1973. Following an OPEC oil embargo, international oil prices jumped from around $2.5 to nearly $12 per barrel, plunging the US economy into "stagflation." During this period, gold's "inflation-hedge" and "safe-haven" properties attracted significant capital inflows. The price of gold, which began free-floating after the collapse of the Bretton Woods system in 1971, rose to around $180 per ounce by the end of 1974.

The 1979 Iranian Revolution triggered the second oil crisis. Concerns over the safety of dollar assets prompted many countries to accelerate the repatriation of gold stored in the US, fueling de-dollarization. Amidst geopolitical turmoil, high inflation, and a weak dollar, the gold price surged from $217 per ounce in January 1979 to $850 per ounce by January 1980.

CICC's report further analyzes that the impact of geopolitical conflict on gold prices initially manifests as a risk premium driven by sentiment, seen in increased volatility and capital reallocation. In the medium term, as uncertainty is gradually digested, risk appetite typically recovers, and market focus returns to fundamentals and policy themes. After the initial sentiment-driven surge subsides, the subsequent impact on asset performance depends on the substantive changes the conflict brings to global supply chains and the macroeconomic environment.

For example, during a specific conflict in June 2025, gold rose 1.49% on the first day but was actually down 1.39% after 30 trading days. Following the 9/11 attacks in 2001, gold spiked 6.85% on the first trading day but gave back some gains, rising only 2.28% after 30 days.

A report from Pictet Wealth Management indicates that gold typically benefits from heightened geopolitical risk and inflation concerns, acting as a safe haven during market stress, and expects precious metal prices to continue rising. However, once situations stabilize, gold often gives back event-driven gains. As long as the conflict remains contained, the US dollar is likely to strengthen in the short term, putting pressure on gold prices.

**Institutions Reassess Portfolios** Faced with extreme volatility in precious metals due to geopolitical conflict, institutions are reassessing their investment portfolios.

Jim Smigiel, Chief Investment Officer at SEI, stated, "We don't yet have enough information to judge how long this situation will last or what the long-term implications will be." He urged individual investors to "stay calm and avoid making major decisions."

UBS Global Wealth Management's Chief Investment Office (CIO) recommends systematic rebalancing, diversification, and hedging of investment portfolios to navigate uncertainty.

The office believes tools such as high-quality bonds, gold, and principal-protection strategies can effectively manage risk in uncertain market environments, helping to build more resilient portfolios. It emphasizes the importance of full diversification across asset classes and active, moderate risk hedging for portfolios.

J.P. Morgan Asset Management suggested that technology stocks in the US and East Asia may attract inflows, while defense and resource sectors could also see opportunities. Over a longer cycle, the firm believes that regardless of the conflict's outcome, geopolitical risk is likely to remain elevated, providing long-term support for gold prices. The subsequent trajectory of oil prices will largely depend on the conflict's duration.

Domestic and international investment banks have differing views on gold's short to medium-term outlook.

A team of strategists at Morgan Stanley led by Amy Gower noted in a recent report that despite escalating Middle East tensions, gold has shown unexpected weakness. This trend is primarily driven by currency dynamics and liquidity needs, with recent dollar strength being a major headwind for precious metals.

In contrast, BMI, a Fitch Solutions unit, stated that if there are no signs of de-escalation in the Middle East, gold could break above $5,600 per ounce this week, setting a new record high. If the conflict persists for two to three weeks, prices could rise to $5,850, potentially even reaching $6,500.

The Morgan Stanley strategists project that if geopolitical tensions persist, gold prices could catch up later this year, reaching $5,700 per ounce.

From the perspective of Soochow Securities, gold's pricing logic remains driven by three factors: validation from US inflation and employment data, Federal Reserve policy calibration, and geopolitical maneuvering. Specifically, a further escalation of US-Iran conflict, triggering a resonance of safe-haven demand and energy-led inflation expectations, could powerfully drive gold higher. However, if macroeconomic data confirms a soft landing, the path for interest rate cuts narrows, and the conflict ends quickly, gold could face adjustment pressures.

Wang Jun, Vice President of Green Dahua Futures, believes that with high global geopolitical uncertainty, weakening confidence in major fiat currencies, ongoing central bank gold accumulation, and substantial demand for metal raw materials from global AI computing and data center construction, multiple favorable factors support a sustained medium to long-term bullish outlook for precious metals.