In March, COMEX gold prices experienced extreme volatility, marked by multiple steep declines. Within less than a month, the metal erased all its gains for the year, falling sharply from historic highs. Starting in mid-March, gold entered a downward trend, dropping steadily from $5,000 per ounce. Particularly on March 18 and 19, the price plunged by more than $400 over two trading sessions, breaching several key support levels. For the week, gold fell 11.26%, marking its largest weekly decline in nearly 43 years since 1983. On March 23, gold prices staged another dramatic sell-off, breaking through four consecutive thresholds from $4,400 to $4,100 per ounce before staging a modest rebound. As of 15:15 on March 24, COMEX gold futures were trading at $4,404 per ounce.
Jing Chuan, a guest professor at Xi’an Jiaotong University, noted that recent international gold prices have faced selling pressure from both technical and structural factors. A stronger U.S. dollar index and rising U.S. Treasury yields have reshaped global asset valuation benchmarks. In the face of high-yielding dollar-denominated assets, gold's appeal as a safe-haven asset has diminished, prompting investors to shift toward U.S. dollar cash or high-interest bonds. This shift, combined with negative feedback mechanisms in the market, has amplified the decline in gold prices.
Has gold lost its status as a safe-haven asset? After a prolonged uptrend, international gold prices have recently undergone an epic collapse. From March 2 to March 24, COMEX gold fell by a cumulative 17%. He Yan, an analyst at Chuanyuan Futures, explained that the sharp decline can be attributed to two main factors. First, escalating geopolitical tensions between the U.S. and Iran pushed oil prices higher, impacting the global economy and triggering simultaneous declines in global stocks and bonds. This led to a short-term liquidity crunch. As a safe-haven asset, gold was also affected by liquidity concerns and faced selling pressure alongside global equities and bonds.
He Yan added that many large international funds allocate assets across stocks, bonds, and gold. When faced with short-term redemption pressures—especially during risk events that cause simultaneous declines in stocks and bonds—these funds may liquidate profitable gold positions to cover losses and meet liquidity needs. When multiple funds engage in such actions collectively, it can trigger extreme selling conditions. Despite the recent decline, He Yan emphasized that gold's safe-haven function has not disappeared. Once market liquidity stabilizes, gold is expected to regain favor among investors.
Second, the surge in international crude oil prices has heightened expectations of rebounding inflation. The Federal Reserve's relatively hawkish stance during its March policy meeting, along with growing expectations of interest rate hikes, has raised concerns about a shift in the Fed’s monetary policy. Currently, both U.S. stocks and bonds are under selling pressure. Jing Chuan further pointed out that earlier market expectations had priced in a Fed easing cycle too aggressively, leading to concentrated inflows into safe-haven assets like gold and driving up prices. However, as U.S. core PCE inflation rose 3.1% year-on-year in January, confirming a rebound in inflation, market risk appetite has staged a partial recovery. Capital has begun flowing out of defensive assets like gold into higher-yielding assets such as equities, creating periodic pressure on gold prices.
Shen Jingcai, a senior gold analyst, stated that the recent historic drop in gold prices is not due to a single factor but results from a combination of influences: the Fed’s hawkish policy, a stronger U.S. dollar and higher Treasury yields, liquidity-driven selling, slower central bank gold purchases, and profit-taking at elevated levels. While liquidity shortages, gold liquidation for cash, and bond sell-offs are important aspects of the decline, they are not the sole or most fundamental causes.
It is worth noting that beyond liquidity effects, monetary policies of central banks worldwide are also shifting. In light of U.S.-Iran tensions, some investment banks predict that inflation in major economies could rise by an average of 0.4 percentage points. Persistently rising energy prices are likely to gradually affect inflation expectations of central banks. Although most Asian economies are unlikely to cut interest rates in the near term, expectations of policy tightening may intensify over time.
Goldman Sachs released a report stating it now expects the European Central Bank to raise interest rates by 25 basis points in both April and June 2026, having previously forecast no change in 2026. This adjustment aligns with recent predictions from J.P. Morgan and Barclays, which also anticipate ECB action in April. Goldman noted that conflict in the Middle East poses inflation risks, with rising energy prices being a primary concern. On March 24, UBS downgraded its ratings on Indian and Eurozone equities, warning that these markets are more sensitive to oil price increases and would be more vulnerable if Middle East tensions persist.
Suresh Tantia, UBS Asia equity strategist, commented, "It may be very difficult to reach a final conclusion on the U.S.-Iran conflict in a short time." In energy-import-dependent markets like India and Europe, equity indices have fallen more than 9% since the outbreak of U.S.-Iran tensions—more than double the decline in U.S. markets. This reflects concerns that sustained energy price increases could curb economic growth, delay interest rate cuts, and increase fiscal pressure. This shift is reinforcing asset managers’ strategic adjustments as they reassess portfolios and move toward more defensive and energy-resilient markets.
Apart from changes in ECB policy, the Fed’s monetary policy has also reached a critical turning point. The rate-cutting cycle is nearing its end, with the policy focus clearly shifting toward fighting inflation. The possibility of rate hikes has re-entered discussions. He Yan noted that at the March 18 Fed meeting, policymakers held rates steady at 3.5%–3.75% for the second consecutive time, in line with market expectations. Compared with the January statement, references to employment "stabilizing" were removed, while attention to uncertainties in the Middle East was added, indicating that external shocks have become a core consideration.
Regarding inflation and the prospect of rate hikes, He Yan stated that if inflation continues to rise, the possibility of rate hikes does exist, though it is not the base case at present. He noted that Fed Chair Powell acknowledged for the first time that the committee had discussed the possibility of hikes, though most members believe it is not yet necessary. Powell emphasized that if inflation does not show progress, rate cuts will not occur. The latest dot plot showed that the number of officials expecting no rate cuts in 2026 increased from four to seven, significantly compressing the room for easing. Overall, the Fed has shifted from a cutting cycle to a wait-and-see stance, with a potential bias toward tightening. If geopolitical conflicts continue to drive inflation higher, the Fed may maintain a restrictive stance in May or June, with hike risks rising further.
However, Shen Jingcai suggested that the Fed’s hawkish pivot is centered around keeping rates higher for longer and delaying cuts, rather than restarting hikes. The bar for rate hikes in May or June is very high and would require consistently stronger-than-expected inflation and employment data. Changes in leadership could also influence the policy path. Investors should closely monitor core PCE data and speeches by Fed officials for clues. The Fed’s March meeting signaled a hawkish pause, with upward revisions to inflation forecasts and delayed rate cut expectations. Powell’s firm stance has reversed earlier easing expectations. Rising oil prices due to Middle East tensions are exacerbating inflation risks, and internal Fed divisions remain. Policy remains highly data-dependent. Gold prices continue to face pressure, and liquidity-driven selling risks persist.
When will gold prices bottom out? As volatility continues, the factors influencing gold are drawing increased attention. He Yan indicated that in the short term, the persistence of equity and bond market impacts from rising oil prices will be key. If Middle East tensions expand further and oil prices continue to climb, global stocks and bonds may remain under pressure, prolonging liquidity issues and likely suppressing gold prices in the near term. Additionally, the direction of Fed policy is critical. If the Fed maintains a hawkish stance or shifts policy, it would compound the impact of oil prices on the global economy. In the medium to long term, however, structural shifts such as the reshaping of the global monetary system, changing geopolitical dynamics, and debt-cycle-driven reevaluation of fiat currencies suggest that the long-term bull market in gold is not over.
Shen Jingcai added that under the current macroeconomic environment, the core drivers of gold are undergoing subtle but critical changes. The U.S. dollar index has also entered a new phase of bullish-bearish contention. Short-term gold movements are influenced by Fed policy, dollar strength, and oil prices, with the overall trend remaining bearish. Supported by hawkish guidance and safe-haven flows, the U.S. dollar is prone to appreciation rather than decline, remaining the primary headwind for gold. Over the medium to long term, the resilience of the U.S. economy and policy divergence among global central banks will be crucial. As long as dollar strength persists, gold is likely to remain under pressure.
Mohit Kumar, global economist at Jefferies, noted in a report that since the U.S.-Iran conflict may last longer than investors hope, further adjustments in risk asset prices are possible. Concerns over stagflation or recession risks may intensify beyond current levels. Many investors had positioned for a quick resolution, so further portfolio adjustments may be needed. Analysts at Saxo Bank added that prolonged conflict in the Middle East is causing broad macroeconomic shocks across global markets, forcing investors to reassess inflation, interest rates, growth, and liquidity conditions simultaneously. Gold is being sold because it is one of the few liquid assets that had appreciated over the past year. It is under pressure from fears that high energy prices will drive up inflation and reduce the likelihood of near-term rate cuts.
Regarding the future trajectory of international gold prices, Shen Jingcai stated that a true bottom would require three conditions: oil prices peaking, expectations for rate hikes peaking, and U.S. dollar liquidity peaking. Currently, none of these conditions have been met. In the short term, gold and silver are likely to remain under pressure from the Fed’s hawkish stance and stagflation fears, oscillating while searching for a bottom. Short-term investors may prefer to wait for clear signals of stabilization in both market sentiment and technical indicators before entering. Long-term investors, however, can begin planning phased accumulation strategies.