Gold prices have seen a sharp drawdown from all-time high levels hit in January this year as investors booked profits following one-way rallies. Now, a fresh catalyst has emerged, which is aiding the bearish sentiment — the US-Iran war.
The US spot gold prices have declined in the last seven consecutive sessions ending March 19, only to rebound today. Since the onset of the Middle East crisis, gold prices have slumped 12% in March so far, looking to snap their six-month winning run. From its all-time peak of $5,595/ounce, the prices have slumped 17%.
Contrary to the trend, gold prices, which ideally should have risen on safe-haven demand, have been knocked down amid the escalating tensions in the Middle East. You may ask why?
The answer lies in the impact on inflation amid crude oil price rise, which has put the Fed’s rate cut math in jeopardy. Yesterday’s steep 3% fall came after the hawkish tone by Fed chairman Jerome Powell.
According to Powell, the Fed has faced a tariff shock, a pandemic, and now an energy shock. All of this could fuel inflationary expectations.
NS Ramaswamy, Head of Commodity & CRM, Ventura, said that bullion is trading less on “geopolitical hedging demand” and more on higher inflation risks, resulting in delaying the US Federal Reserve’s rate cut trajectory. A high interest rate environment is non-favourable for non-yielding assets like gold.
The US dollar also continues to advance on the rising oil prices and the Fed’s hawkish rhetoric, exerting pressure on gold prices. The dollar index is up nearly 2% in March. Any rise in the greenback dims the appeal of gold for buyers of other currencies.
Gold price outlook
YES Bank, in a note, said that while structurally, gold’s position as a safe-haven remains, oil has also emerged as an asset class in the wake of the crisis. “If the war continues in the medium term, the positioning in gold will be a delicate balance between real yields, the dollar’s direction, and on the other side, the need for defensive investments,” it added.
A major chunk of the rally in 2025, when gold jumped 70%, came after steady buying by central banks. A World Gold Council (WGC) report suggested that central banks, on a net basis, bought 5 tonnes in January compared to an average of 27 tonnes per month in 2025. While central banks’ demand may sustain in 2026, the pace may be slower than in 2025.
Ramaswamy said that technically, gold has broken all the near resistances $5200, $5000 and also the reversal signals near $4796-$4696.
“The structural uptrend is on a wait-and-watch of the headwinds to be cleared. The liquidity squeeze and the ongoing bearish sentiment on the risk-on trades in equity stocks are adding pressure to gold,” said the expert.
YES Bank said that historically, gold prices have performed well in periods of stagflation, and such risks are building now; however, its technical analysis signals a bearish trend for the bullion.
The brokerage cautioned that a close below $5000 on a daily basis will confirm the breakout for a move to $4600/4400, while this will be invalidated above $5150.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
