The traditional rule of buying gold during turbulent times appears to have been broken. Since March 2026, global commodity markets have witnessed a notable divergence in asset performance. Rising geopolitical tensions in the Middle East have driven oil prices higher, yet gold, traditionally viewed as a safe-haven asset, has failed to strengthen in tandem. Historically, escalating geopolitical conflicts often lead gold and crude oil to move in the same direction, driven by both safe-haven demand and supply concerns. However, the current trend shows the two moving in opposite directions, drawing widespread market attention.

An Unusual Price Divergence In mid-March, as tensions in the Strait of Hormuz continued to intensify, international oil prices maintained a strong upward trend. As of the close on March 17, the April delivery light crude oil futures on the New York Mercantile Exchange rose by $2.71, settling at $96.21 per barrel, a gain of 2.90%. The May delivery Brent crude futures on the London ICE Futures Europe exchange increased by $3.21, closing at $103.42 per barrel, up 3.20%. A fire caused by a new attack halted oil loading operations at the key export terminal of Fujairah Port, managed by the Abu Dhabi National Oil Company. Concurrently, the death of the Secretary of Iran's Supreme National Security Council in an attack further heightened market concerns about supply. Despite its safe-haven characteristics, gold has not benefited from this geopolitical risk. Currently, the COMEX gold futures front-month contract and spot gold prices are hovering around $5,000 per ounce, having retreated from previous highs. Regarding this divergence in the gold-to-oil ratio, some institutional views suggest that the primary driver for gold is not simply risk aversion but real interest rates. Rising oil prices boost inflation expectations, which in turn influences market expectations for Federal Reserve monetary policy. Delayed expectations for interest rate cuts support the US dollar and US Treasury yields, putting downward pressure on gold. Data shows that as of 4:00 PM on March 18, the US 10-year Treasury yield was quoted around 4.18%, the 10-year TIPS (Treasury Inflation-Protected Securities) yield was around 1.80%, and the US Dollar Index was near 99.60, all remaining at elevated levels. The opportunity cost of holding gold remains relatively high.

What is the Market Pricing In? With oil prices rising rapidly and stabilizing above $100 per barrel, the gold-to-oil ratio (the ratio of gold price to oil price), an indicator of market risk appetite and inflation expectations, has fallen sharply from near 85 at the beginning of 2026 to below 55 currently. Typically, this suggests that crude oil is relatively stronger while gold is relatively weaker, indicating that the market might be pricing in a scenario of high inflation coupled with high interest rates, rather than recession and safe-haven demand. This aligns with the current performance of rising oil prices and falling gold prices. Fund flows also reflect this shift in market preference to some extent. Looking at domestic ETFs as a reference, among the top ten ETFs by net inflows in the first week of March 2026, oil and gas-related products occupied four spots. Guotai Fund's Oil ETF attracted 6.598 billion yuan, ranking first, followed by Penghua's Oil ETF, Huitong Fu's Oil & Gas ETF, and Invesco's Oil ETF, which attracted 4.847 billion yuan, 4.014 billion yuan, and 2.582 billion yuan respectively. These four ETFs combined attracted a total of 18.041 billion yuan. Although these products saw outflows to varying degrees in the second week of the month, the overall upward trend remains intact. According to a Bank of China Futures research report, for the week ending March 13, API crude oil inventories increased by 6.556 million barrels, compared to an expected increase of 73,000 barrels. API gasoline inventories decreased by 4.56 million barrels, against an expected decrease of 1.815 million barrels. API distillate inventories fell by 1.394 million barrels, compared to an expected decrease of 1.721 million barrels.

Is Gold's Monetary Substitute Property Being Reactivated? While the market widely discusses the logic of high interest rates suppressing gold, Zhang Xia, Chief Strategist at China Merchants Securities, offers an alternative perspective. Zhang Xia suggests that most market participants' understanding of gold prices, or gold priced in US dollars, is largely based on historical data from 1985 to 2021. This pricing framework rests on two basic assumptions: that US dollar oversupply pushes up gold prices, and that US real interest rates move inversely with gold prices. Essentially, this is a framework where gold is anchored to the US dollar, which might merely be a product of a specific historical period. The core of this analytical framework lies in analyzing the nature of sovereign credit currencies. Zhang Xia believes the value of a sovereign credit currency is supported by three pillars: economic productivity, military and geopolitical power, and institutional credibility and rule of law. After the Russia-Ukraine conflict in 2022, the Western freeze of Russian foreign exchange reserves was a landmark event that shattered the existing cornerstone of international finance—the principle of inviolability of sovereign assets—introducing "usability risk" as a new variable in global asset pricing. From this perspective, the three traditional assumptions underpinning modern capital market valuation—the going concern assumption, the profit maximization assumption, and the efficient market hypothesis—are being eroded. Based on this reasoning, Zhang Xia suggests that if US dollar credibility continues to erode, gold's property as a monetary substitute could be reactivated, leading to a systematic rise in its price level. The widely discussed logic of high interest rates suppressing gold prices might merely be a short-term market inertia. Viewing the present through a longer-term lens, Zhang Xia sees similarities between the current international environment and the period from 1970 to 1980. During that time, due to a systemic imbalance in the pillars supporting sovereign credit currencies, the international monetary system entered a volatile transitional period of bipolar competition. After the US dollar broke its anchor, gold prices soared under a fully market-based pricing mechanism, skyrocketing from $35 per ounce to a historical high of $850 in 1980. This was essentially a collective action reflecting a global vote of no confidence in US dollar credibility. This turbulence persisted until 1979. Following the Soviet Union's entanglement in the Afghanistan war and Paul Volcker's appointment as Fed Chairman, gold experienced its final decline in 1980. As US dollar credibility was restored and the market anticipated the outcome of the US-Soviet rivalry, gold entered a four-decade-long phase of implicit anchoring to the dollar. Perhaps, in Zhang Xia's view, gold's current "sluggishness" under interest rate pressure is building momentum for a new paradigm shift.