GOLD: Extremely Brutal Combination of Macroeconomic Shocks
$Gold - main 2604(GCmain)$ is currently facing a typical but extremely brutal combination of macroeconomic shocks: a stronger dollar, rising US Treasury yields, and a rapid reassessment of global market expectations regarding interest rate paths following the Middle East wars that pushed up oil prices. This confluence of factors has turned gold, which should have benefited from the geopolitical crisis, into a target of continuous selling.
As the Middle East war enters its fourth week, with the US and Iran continuing to threaten to expand their attacks, gold prices fluctuated wildly at the beginning of the week. After experiencing its worst weekly drop in over 40 years, spot gold fell to a new low since early January at $4319.32 per ounce on Monday (March 22), before recovering to trade around $4410. The previous week, gold plummeted nearly 11%, recording its worst weekly performance since 1983; since the outbreak of the conflict on February 28, the cumulative decline in gold has approached 15%.
This volatile trend is also highly consistent with the performance of the broader market. Crude oil prices rose slightly in early trading before falling back, and global stock markets also experienced increased volatility, indicating that investors still lack a clear understanding of the situation in the Middle East and the macroeconomic outlook. The Bloomberg Dollar Spot Index, after falling 0.5% last week, was largely flat at the start of this week, but the dollar remained strong overall, putting pressure on gold. Meanwhile, gold has fallen for eight consecutive trading days since the outbreak of the conflict, indicating that the market is continuing to reduce its long positions in the short term. Analysts point out that this decline is not only affected by yields and a stronger dollar, but also by some investors being forced to sell gold to cover losses in other assets.
The war failed to support gold; instead, it triggered the "high oil price—high inflation—high interest rate" logic.
Generally, escalating geopolitical crises tend to strengthen gold's safe-haven appeal, but the current market context has complicated this logic. The war has pushed up international oil prices, and rising oil prices have reignited inflation concerns, forcing the market to abandon expectations of short-term interest rate cuts by the Federal Reserve and other major central banks, and instead factor in the possibility of maintaining high interest rates for a longer period, or even tightening policies again.
This is the core reason for the current pressure on gold. The yield on 10-year US Treasury bonds rose to around 4.39%, and the US dollar strengthened amid safe-haven buying and inflation concerns. In this environment, gold lost one of its most important supporting factors—market expectations of declining interest rates. Since gold itself does not generate interest income, the opportunity cost of holding gold naturally increases when investors can obtain higher returns from cash and government bonds.
In other words, the market is not currently trading on a simple "declining risk appetite = rising gold prices," but rather on an inflation repricing driven by energy shocks. The higher the oil prices, the more likely inflation is to be persistent; the more persistent the inflation, the more likely interest rates are to remain high for a longer period. This macroeconomic chain is clearly unfavorable to gold at the margin.
Forced selling and profit-taking exacerbated the decline.
Besides macroeconomic factors, this round of gold price declines also clearly involves liquidity squeezes and profit-taking. Gold prices surged dramatically in the past, reaching a record high at the end of December 2025. Several major international banks, such as JPMorgan Chase and UBS, raised their long-term target prices for gold, making it a highly crowded bullish market.
When a market has previously experienced significant gains, concentrated holdings, and substantial paper profits, a shift in the macroeconomic environment can easily trigger a "stampede" of price corrections. The recent sharp drop in gold prices is a typical example of this fragile structure being broken.
Furthermore, since the outbreak of the war, overall market volatility has significantly increased, with other assets such as stocks and bonds also experiencing sell-offs. This forced some investors to sell gold to offset losses in other parts of their portfolios. This "passive selling" further amplified the decline in gold prices. $XAU/USD(XAUUSD.FOREX)$
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