Heightened geopolitical tensions in the Middle East have triggered a surge in safe-haven demand, driving volatility in global financial markets. On February 28, the United States and Israel launched a preemptive military strike against Iran, prompting retaliatory actions from Iran targeting Israeli and other military assets across the region. As of March 2, the situation remains tense, keeping global investors on edge.
In response, prices of spot gold and silver in London experienced significant fluctuations following the market opening on March 2. Both metals surged sharply at the start of trading, with gains exceeding 2%, before rapidly retreating and entering a phase of consolidation. The trading pattern displayed a clear trend of initial spikes followed by pullbacks, accompanied by wide price swings. As of 15:20, spot gold was trading at $5,419.32 per ounce, while spot silver stood at $95.821 per ounce.
Concurrently, domestic physical gold markets in China also saw increased activity, with reports of queues forming outside brick-and-mortar gold stores as buyers rushed to purchase gold. Major gold brands collectively raised their prices, reflecting the rising risk-off sentiment among investors.
International gold and silver prices exhibited notable volatility amid the escalating tensions. After a weekend of market sentiment buildup, precious metals opened strongly on March 2. Spot gold and silver opened at $5,281.53 and $93.744 per ounce, respectively, and climbed rapidly during the session to intraday highs of $5,393.41 and $96.396 per ounce—both posting gains of over 2%. However, the rally proved short-lived as prices quickly reversed, with spot gold falling back to $5,281.33 and silver dropping below its opening price to a low of $91.977. By 15:20, both metals had resumed an upward trajectory.
Even prior to the latest escalation, investor interest in physical gold within China had already been rising due to anticipatory market reactions. On March 1, visits to several gold retailers in Beijing revealed long queues, with younger consumers using savings to make purchases and older investors increasing their gold holdings, pushing safe-haven sentiment to a peak. By March 2, domestic gold prices at leading brands had risen in tandem, with retailers such as Chow Tai Feng reaching ¥1,629 per gram, while brands like Saturday福, Luk Fook Jewelry, and King Gold climbed to ¥1,624 per gram.
Analysts offered insights into the metals' volatile price action. Wang Hongying, President of the China (Hong Kong) Institute of Financial Derivatives Investment, noted that the pullback from highs was largely due to profit-taking by investors who had accumulated significant gains as prices reached new peaks. He also pointed out that the market had shifted from emotion-driven buying to a more rational phase of trading. Nevertheless, he emphasized that precious metals remain well-supported, with an overall trend of volatile upward movement expected to continue.
Wu Zewei, a special researcher at SuShang Bank, added that the market's behavior reflects a tug-of-war between preemptive pricing of geopolitical risks and short-term profit-taking. He explained that the oscillation clearly illustrates the complexity and fragility of current market sentiment: while genuine safe-hemand demand underpins gold prices, substantial existing long positions are highly sensitive to price swings, leading to intense back-and-forth between bulls and bears.
Wu anticipates that both London-traded gold and silver and domestic physical gold will continue to experience high volatility, with short-term direction heavily dependent on how the Iran situation evolves. Should conflicts intensify or the Strait of Hormuz face prolonged closure, rising oil prices could fuel inflation expectations—adding a second driver to safe-haven demand—potentially pushing gold beyond previous highs. Conversely, a rapid de-escalation or diplomatic resolution could cause prices to retreat.
From a longer-term perspective, Wang Hongying indicated that the Trump administration's "America First" military expansion policy has increased the likelihood of international geopolitical conflicts, leading institutional investors to consistently allocate funds to precious metals as a hedge. Additionally, he suggested that the U.S. is likely to enter an interest rate cutting cycle in the coming years to support sustainable economic growth, which would weaken the U.S. dollar and further bolster gold prices.
Several financial institutions have issued warnings urging investors to exercise caution. Industrial and Commercial Bank of China advised clients to closely monitor market movements, strengthen risk management, and trade rationally to safeguard assets. Postal Savings Bank of China highlighted the heightened uncertainty and sharp price swings in precious metals markets and urged customers engaged in gold accumulation and physical gold trading to enhance risk awareness, invest prudently, and avoid chasing rallies or panic selling. China Everbright Bank similarly warned investors to stay alert to market changes, manage positions carefully, and maintain sufficient margins.
Wu Zewei recommended that financial institutions reinforce risk controls and adopt a cautious stance toward leveraged trading. Retail investors, he suggested, should adopt a long-term allocation approach, favoring non-leveraged products such as gold accumulation plans and physical gold bars. Buying during price dips and avoiding emotional trading, while limiting gold exposure within their overall portfolio, can help mitigate risks.
Wang Hongying further advised that, given gold's repeated new highs and elevated risk premiums, financial institutions should enhance product design and suitability assessments to protect consumers. Investors should prefer non-leveraged instruments like ETFs, physical gold, and silver bars over leveraged derivatives such as futures and options. He also cautioned against illegal gold trading platforms, which often lure investors with high leverage and low thresholds but operate outside regulated markets. Investors should only use authorized channels such as the Shanghai Gold Exchange, major commercial banks, and licensed gold retailers to avoid fraudulent schemes and potential legal issues.
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