Gold Falls Below $4,700, Have Safe-Haven Assets Lost Their Magic Amid Geopolitical Conflicts?

Beijing News Shell Finance Reporter Xu Yuting Editor Chen Li Proofreader Mu Xiangtong

Amid escalating geopolitical conflicts, traditional safe-haven asset gold is moving in the opposite direction.

On March 19, international gold prices briefly fell below the $4,700 mark. As of 4:50 PM on March 19, spot gold was at $4,710 per ounce, down over 2%; COMEX gold was at $4,706 per ounce, down over 3%. On the evening of March 18, international gold prices experienced a sharp plunge, breaking through the $4,930, $4,920, and $4,900 levels consecutively.

“Safe-haven logic has not failed; rather, it has shifted to the upward valuation of the dollar,” said Tian Lihui, Dean of the Institute of Financial Development at Nankai University. From a deeper perspective, this is a typical “oil price backlash on gold” transmission chain: war pushes up oil prices, which fuels inflation; inflation suppresses rate cut expectations, ultimately making gold a victim of high interest rates.

Are safe-haven assets failing?

The strengthening of the US dollar has suppressed gold

In early March, spot gold prices briefly surged above $5,400 per ounce during trading, but then significantly retreated, overall oscillating downward. On March 18, international gold prices fell below $4,900 per ounce, closing at $4,813.5, a decline of 3.86%; COMEX gold closed at $4,823.9, down 3.68%.

On March 19, international gold prices continued to fluctuate downward. The domestic gold sector also suffered setbacks; by the close of that day, Zijin Mining, China Gold, and Shandong Gold fell over 7%, Zhaojin Gold dropped over 6%.

As gold, a safe-haven asset, declines, domestic gold jewelry prices also fell for several days. On March 19, Chow Tai Fook’s pure gold jewelry was quoted at 1,503 yuan per gram, Chow Sang Sang at 1,492 yuan per gram, and China Gold at 1,489 yuan per gram.

Is gold, as a safe-haven asset, failing? Tian Lihui explained that the attack on Iran’s energy facilities led to disruptions in the Strait of Hormuz, causing oil prices to soar, directly boosting inflation expectations. The market realized that the Federal Reserve is unlikely to cut rates, and some institutions even began to reassess the possibility of rate hikes. The dollar index rebounded, US Treasury yields surged, and the cost of holding gold—an asset with zero interest—shot up sharply, prompting funds to sell gold and shift into the dollar.

“Although geopolitical conflicts continue, market pricing has shifted focus to macro liquidity and policy battles. Safe-haven logic has given way to interest rate and dollar logic,” Tian Lihui said. The current market is a re-pricing of currency trends.

A research report from Shenwan Hongyuan Futures believes that the sharp correction in gold amid escalating geopolitical conflicts is due to multiple factors: a rebound in real interest rates caused by expectations of rate cuts being revised downward, liquidity tightening from decreased risk appetite, and the high gold-oil ratio being restored.

Cinda Futures’ research report pointed out that the core driver of gold’s current trend is the upward movement of energy prices constraining interest rate expectations. As conflicts in the Middle East persist, oil prices remain high. Brent crude futures previously stabilized above $100, significantly raising concerns about inflation stickiness. In this context, market expectations for inflation to decline have become cautious, weakening the pricing of rate cuts and causing the dollar to strengthen temporarily, which suppresses gold.

Tian Lihui noted, “The logic of ‘inflation backlash on gold’ will persist throughout the conflict period, depending on two variables: the duration of the Strait of Hormuz disruption and the Federal Reserve’s policy response. As long as energy supply disruptions continue and oil prices stay high, rate cut expectations will remain fragile, and gold will continue to be under pressure.”

Is this a short-term correction or a reversal of the bull market?

Experts recommend “gradual allocation and long-term holding”

“This decline is a deep correction within a bull market, not a trend reversal,” Tian Lihui said. He believes that gold’s medium-term support remains solid, the Federal Reserve is still in a rate-cutting cycle, the downward trend in real interest rates will eventually resume, and the fragmentation of geopolitical risks is irreversible. Gold’s ultimate safe-haven value remains intact, and ongoing central bank gold purchases form a solid bottom. The correction will create a window for medium- to long-term allocation.

Tian Lihui predicts that by 2026, gold prices will undergo a “three-phase transition”: from now until the first half of the year, the focus is on “inflation and interest rate battles,” driven by oil prices and Fed policies; in the second half and into Q3, the market may shift to “stagflation trading,” as sustained high oil prices hinder growth and revalue gold’s safe-haven role; if conflicts ease in Q4, the market will return to “rate cut expectation trading,” with falling real interest rates boosting gold prices.

“Looking ahead, in the short term, gold remains in a phase of intertwined geopolitical risks and macro interest rate expectations. The Middle East conflict has no clear resolution path yet, meaning safe-haven factors may fluctuate; meanwhile, high energy prices continue to disturb inflation and policy outlooks, putting downward pressure on gold. With mixed factors, the market is unlikely to form a clear trend and is expected to oscillate within a range,” the Cinda Futures report said.

The report emphasizes that attention should be paid to this week’s interest rate decisions and Powell’s speeches, as hawkish signals or increased focus on inflation could pressure gold; conversely, concerns about the economy or risk events could ease downward pressure.

CITIC Securities metal industry analyst Tu Yaoting believes that after each Middle East conflict, the medium-term trend of gold depends on dollar credit and liquidity factors. Looking ahead, the continuation of loose liquidity and weakening dollar credit are expected to keep pushing gold prices higher.

A Shenwan Hongyuan Futures report states that currently, President Trump’s signals of a ceasefire and Iran’s conditions for a truce, along with falling crude oil prices as geopolitical risks subside, will ease the inflationary pressures caused by unexpected tightening of monetary policy. Market expectations for Fed rate cuts will rise again, and the upward momentum of US Treasury yields and the dollar index will weaken, directly alleviating the core interest rate constraints on gold.

Although signs of easing conflicts exist, Middle East geopolitical uncertainties remain, and the Fed’s high-rate stance persists. Global risk aversion continues, and gold’s dual role as a safe haven and inflation hedge will re-emerge. Coupled with profit-taking from previous gold gains due to oil surges, the correction in oil prices and policy expectations will become the main drivers of gold’s rebound, leading to a volatile upward trend.

Tian Lihui recommends that ordinary investors adopt a “allocation mindset” rather than a “trading mindset,” employing a “gradual allocation and long-term holding” strategy. Once the correction stabilizes, it will open a window for medium- to long-term positioning. Investors can consider buying physical gold or gold ETFs on dips, avoid leverage trading, and keep their holdings at 5%-10% of total assets.