Gold, traditionally a safe-haven asset, has moved inversely despite escalating geopolitical conflicts. On March 19, the international gold price briefly fell below the $4700 mark. As of 4:50 PM on March 19, spot gold was trading at $4710 per ounce, down over 2%, while COMEX gold was at $4706 per ounce, declining more than 3%. The previous evening, international gold prices experienced a sharp drop, successively breaking through the $4930, $4920, and $4900 thresholds.
"The safe-haven logic has not failed; instead, it has yielded prominence to the upward revaluation of the US dollar," stated Tian Lihui, Dean of the Institute of Financial Development at Nankai University. He explained that, on a deeper level, this represents a classic "oil price backlash on gold" transmission chain: conflict drives up oil prices, which in turn fuels inflation; inflation then suppresses expectations for interest rate cuts, ultimately making gold a casualty of a high-interest-rate environment.
Has the safe-haven asset lost its effectiveness? A temporary strengthening of the US dollar is exerting pressure on gold. Earlier in March, spot gold prices surged past $5400 per ounce intraday but have since retreated significantly, trending downwards overall. On March 18, international gold prices fell below $4900 per ounce, with spot gold closing at $4813.5, down 3.86%, and COMEX gold finishing at $4823.9, a drop of 3.68%. Prices continued their volatile decline on March 19.
China's A-share gold sector also faced setbacks. By the market close, Zijin Mining, Zhongjin Gold, and Shandong Gold all fell over 7%, while Zhaojin Gold dropped more than 6%. As international gold prices softened, domestic gold jewelry prices declined for several consecutive days. On March 19, Chow Tai Fook's pure gold jewelry was quoted at 1503 yuan per gram, Chow Sang Sang's at 1492 yuan, and China Gold's at 1489 yuan.
Tian Lihui noted that attacks on Iranian energy facilities disrupting shipping through the Strait of Hormuz led to a spike in oil prices, directly inflaming inflation expectations. The market realized that hopes for Federal Reserve rate cuts were fading, with some institutions even reassessing the possibility of rate hikes. The rebound in the US dollar index and surge in US Treasury yields significantly increased the holding cost of gold, a zero-yield asset, prompting a natural shift of funds away from gold towards the US dollar. "While geopolitical conflicts persist, the market's pricing focus has shifted to macro liquidity and policy dynamics, with safe-haven rationale giving way to interest rate and dollar logic," Tian stated, adding that the market is currently repricing monetary policy direction.
A Shenwan Hongyuan Futures research report suggested that the significant correction in gold prices amidst escalating geopolitical tensions results from multiple factors. These include a rebound in real interest rates due to revised rate-cut expectations, liquidity tightening caused by declining risk appetite, and a correction from high gold-to-oil ratios.
A Cinda Futures report indicated that, from a current driver perspective, the core of gold's movement lies in the renewed constraint on interest rate expectations due to rising energy prices. With ongoing Middle East conflicts keeping crude oil prices elevated—Brent crude futures previously stabilized above $100—concerns about persistent inflation have significantly increased. This has made the market more cautious about the path of disinflation, thereby weakening pricing for rate cuts and contributing to a temporary dollar strength that pressures gold.
Tian Lihui pointed out that the "inflation backlash on gold" logic will persist throughout the conflict period, its duration depending on two variables: the length of disruptions to shipping through the Strait of Hormuz and the Federal Reserve's policy response. As long as energy supply disruptions continue and oil prices remain high, expectations for rate cuts will be difficult to restore, keeping gold under pressure.
Is this a short-term correction or a reversal of the bull market? Experts recommend a strategy of "phased accumulation and long-term holding." Tian Lihui characterized the current decline as a deep correction within a bull market rather than a trend reversal. He emphasized that medium-term support for gold remains solid, as the Fed's overarching direction towards a rate-cutting cycle is unchanged. The eventual return of a downward trend in real interest rates, the irreversible fragmentation of geopolitics, gold's ultimate safe-haven value, and continued gold purchases by global central banks collectively form a solid foundation. A correction to appropriate levels could present a window for medium-to-long-term allocation.
Tian projected that gold price trading logic in the coming period will evolve through three phases: from now until the first half of the year, the core will be "inflation versus interest rate dynamics," with volatility driven by oil prices and Fed policy; from the second half to the third quarter, a potential shift to "stagflation trading" could occur, where gold's safe-haven value would be reassessed if high oil prices hinder growth; and in the fourth quarter, if conflicts ease, the focus may return to "rate-cut expectation trading," with falling real rates potentially driving gold prices higher again.
Looking ahead, in the short term, gold remains caught between geopolitical risks and macro interest rate expectations. The absence of a clear path to de-escalation in the Middle East suggests the safe-haven factor could resurface. Simultaneously, high energy prices continue to disrupt inflation and policy outlooks, exerting downward pressure on gold. With conflicting factors at play, a clear unilateral trend is unlikely, and range-bound fluctuation is expected to dominate.
The Cinda Futures report highlighted the importance of this week's interest rate decision and subsequent commentary. A hawkish policy stance or heightened focus on inflation could maintain pressure on gold, whereas expressed concerns about the economy or risk events might help alleviate downward pressure.
Tu Yaoting, a metals industry analyst at CITIC Securities, believes that following past Middle East conflicts, gold's medium-term trajectory has ultimately depended on US dollar credibility and liquidity factors. For the current conflict, the continuation of loose liquidity and weakening US dollar credibility trends is expected to continue pushing gold prices higher.
The Shenwan Hongyuan Futures report noted that recent signals suggesting a potential ceasefire and conditions for a truce have led to a cooling of crude oil prices alongside reduced geopolitical risk premiums. This could ease pressure for tighter monetary policy due to unexpectedly high inflation, allowing market expectations for Fed rate cuts to rekindle. Weakening support for rising US Treasury yields and the dollar index would directly remove a key interest rate constraint on gold. Furthermore, while there are signs of conflict de-escalation, Middle East uncertainties remain, the Fed's high-rate stance persists, and global safe-haven demand endures. Gold's dual attributes as a safe-haven and inflation hedge are likely to regain prominence. Combined with the prior correction releasing overbought pressure, a repair in policy expectations driven by falling oil prices could become a core catalyst for gold's ascent, potentially initiating a volatile upward trend.
Tian Lihui advised retail investors to adopt an "allocation mindset" over a "trading mindset," implementing a strategy of "phased accumulation and long-term holding." After the current correction finds a bottom, a window for medium-to-long-term allocation may open. Investors could consider accumulating physical gold or gold ETFs at lower levels, avoiding leveraged trading and keeping gold exposure within 5%-10% of total assets.