Gold price rebounds after historic March 2026 drop amid Middle East conflict

Gold price inched higher as investors reassessed a dramatic selloff that has seen the metal fall more than 15% since the start of the Middle East conflict.

On Tuesday, spot gold rebounded from earlier losses that had put it on track for a record 10th straight drop.

War-driven inflation pressures shift investor behaviour

The ongoing Middle East crisis has pushed energy prices higher, increasing inflation risks across global markets.

Investors are moving away from gold – despite its traditional safe-haven status—and reallocating funds into other assets.

Like the rest of the 金融市場, gold has been pulled back and forth by a constant stream of war headlines. Prices tumbled as much as 8.8% on Monday before paring much of the drop.

Fighting continues, even as President Donald Trump said talks to end the conflict are underway. Meanwhile, a report by the Wall Street Journal suggested that US allies in the Persian Gulf could be drawn further into the conflict, adding to the uncertainty.

Strait of Hormuz and energy infrastructure remain key risks

No one really knows how the negotiations will play out, or whether ships will be able to move freely through the Strait of Hormuz in the weeks ahead. Repairs to damaged oil and gas infrastructure could take months, keeping global energy supply under pressure.

This uncertainty continues to fuel inflation expectations, while interest-rate hikes by the Federal Reserve and other central banks weigh on non-yielding precious metals like gold.

Rising yields put pressure on gold

Gold is also being dragged down by a quieter but powerful force: rising real yields.

Inflation-protected government bonds now offer higher yields, while gold—by its nature—doesn’t pay anything. When investors can earn more elsewhere, holding gold becomes a harder sell.

Historical patterns repeat

A similar pattern unfolded after the Russian invasion of Ukraine in early 2022. Gold price initially jumped as investors rushed to a safe-haven commodity, but the rally didn’t last.

As energy prices surged and the shock spread through global markets, inflation picked up—eventually dragging gold into a decline that lasted for months.

“Gold’s price correction has seen a steeper-than-usual underperformance,” said Suki Cooper, global head of commodities research at Standard Chartered Plc, adding that it is “not unusual for gold to endure downside pressure for four to six weeks following a period of extreme distress, as gold proves to be a liquid asset in times of need.”

Investors cash in on winners

Another clear trend in this market: investors are selling what’s performing well.

Gold is part of that, but it’s not alone. Silver has fallen even further behind, while Bitcoin has moved in the opposite direction, posting gains.

“What you tend to see in a big crisis like this is investors selling heavily positioned, well-performing assets in order to fund margin calls for underperforming assets — equities, bonds, whatever,” said Peter Kinsella, global head of forex strategy at Union Bancaire Privee UBP SA.

Gold performed in a similar manner in previous market shocks, he said. “Short-term shifts in pricing are all about positioning. Longer term it’s all with the monetary drivers. And that hasn’t changed.”

Gold may have slipped in recent weeks, but it had previously been on a strong run before the conflict began.

That rally was driven by a mix of geopolitical tensions, trade uncertainty, and steady buying from central banks. But the current surge in energy costs is starting to complicate that picture.

Many of the countries that have been stockpiling gold are also major energy importers. With oil and gas bills rising sharply, they now have less cash available to channel back into gold purchases.

Latest market moves

Spot gold edged up 0.4% to $4,425.18 an ounce by 10:14 a.m. in London.

Silver outperformed with a 1.3% gain to $70.06 an ounce, while platinum also moved higher and palladium held steady. The Bloomberg Dollar Spot Index rose 0.2%.

Gold sees its biggest decline since 1983

Gold has had a brutal week. The metal that spent all of 2025 breaking records just posted its worst seven-day performance in more than forty years.

By March 20, it had fallen 11% to $4,497 an ounce – a drop of more than $500 from where it started the week and a loss of over 14% since the U.S.-Israel strikes on Iran began in late February.

Echoes of 1983

The last time gold fell this sharply in a single week was 1983, when Middle Eastern oil producers offloaded their gold reserves after oil revenues collapsed.

History repeats, but the story is different

The parallels to today are striking and worrying. Once again, a Middle East crisis is driving the sell-off. But this time the mechanics are not the same as in the 1980s.

This time, the decline is fuelled by a combination of rising real yields, a stronger U.S. dollar, and investors liquidating positions in response to geopolitical uncertainty.

Conclusion: Why gold has fallen amid Middle East tensions

Gold, the classic safe-haven asset, would normally shine during crises, yet since the Middle East conflict began, it has declined each week. The sharp fall is driven by a combination of factors: rising real yields, a stronger U.S. dollar, and investor liquidation in response to geopolitical uncertainty.

Higher crude oil prices have pushed inflation expectations upward, limiting the Federal Reserve’s room to cut rates, while gold price—offering no interest—becomes less attractive compared to Treasury bonds. Together, these forces have created a powerful headwind that outweighs the traditional safe-haven demand for gold.

“This sharp decline in gold reflects a confluence of factors: large-scale risk asset liquidations, a hawkish shift in Fed expectations, and a stronger dollar,” explained Pepperstone strategist Dilin Wu. She described the move as “a pricing logic adjustment rather than a reversal of the long-term trend.”

Investors should recognise that this decline reflects short-term market adjustments rather than a reversal of gold’s long-term trend. Monitoring ongoing developments in the Middle East, energy markets, and interest rates will be essential for understanding gold’s trajectory in the coming months.

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