Gold Plummets! Breaks Below $4,700, Are Safe-Haven Assets Failing Amid Geopolitical Conflict?

How does rising oil prices negatively impact the safe-haven value of gold?

Despite ongoing geopolitical conflicts, traditional safe-haven assets like gold are showing a reverse trend.

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

“The safe-haven logic has not failed; rather, it has shifted due 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; rising inflation suppresses rate cut expectations, ultimately turning gold into a casualty of a high-interest-rate environment.

Safe-haven assets fail? The US dollar’s phase of strength suppresses gold

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

On March 19, international gold prices continued to fluctuate downward. The gold sector in A-shares was hit hard; by the close, Zijin Mining, China Gold, and Shandong Gold dropped over 7%, Zhaojin Gold fell over 6%.

As gold prices decline internationally, domestic gold jewelry prices have also fallen 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 attacks on Iran’s energy facilities have disrupted shipping through the Strait of Hormuz, causing oil prices to soar and directly boosting inflation expectations. The market has realized that the Federal Reserve is unlikely to cut rates, and some institutions are even reassessing the possibility of rate hikes. The dollar index rebounded, US Treasury yields surged, and the cost of holding gold—an asset with zero interest—rises sharply, leading to capital selling gold and shifting into dollars.

“Although geopolitical conflicts persist, the market’s focus has shifted to macro liquidity and policy battles, with safe-haven logic giving way to interest rate and dollar logic,” Tian said. The current market is essentially a re-pricing of currency trends.

Shenwan Hongyuan Futures research report believes that the significant 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 points 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 continue, oil prices remain high. Brent crude futures previously stayed above $100, significantly raising concerns about persistent inflation. Under this backdrop, market expectations for inflation to decline have become more 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 face pressure.”

Short-term correction or reversal of 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 said. He believes that medium-term support for gold remains solid. The Fed is still in a rate-cutting cycle, with the overall downward trend of real interest rates expected to resume. Geopolitical fragmentation is irreversible, and gold’s ultimate safe-haven value remains intact. Central banks worldwide continue to buy gold, forming a solid bottom. The correction presents a good entry point for medium- to long-term allocation.

Tian predicts that by 2026, gold trading logic will shift through “three phases”: from now until the first half of the year, focus on “inflation and interest rate battles,” driven by oil prices and Fed policies; in the second half and into Q3, possibly shift to “stagflation trading,” if high oil prices continue to weigh on growth, leading to a reassessment of gold’s safe-haven value; in Q4, if conflicts ease, the market will revert to “rate cut expectations,” with falling real interest rates supporting a rebound in 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 at play, the market is unlikely to form a clear trend, and expect mainly range-bound oscillations,” Cinda Futures’ report states.

The report emphasizes paying close attention this week to interest rate decisions and Powell’s speeches. If policies lean hawkish or emphasize inflation concerns, gold may remain under pressure; if concerns about the economy or risks ease, downward pressure could be alleviated.

CITIC Securities metals analyst Tu Yaoting believes that after past Middle East conflicts, the medium-term trend of gold depends on dollar credit and liquidity factors. The current conflict is expected to continue the trends of loose liquidity and weakening dollar credit, which will support gold prices.

Shenwan Hongyuan Futures’ report notes that 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 inflationary pressures and the tightening of monetary policy. Market expectations for Fed rate cuts will rise again, and the upward movement of US Treasury yields and the dollar index will weaken, directly easing the main rate constraints on gold.

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

Tian advised that ordinary investors should adopt a “allocation mindset” rather than a “trading mindset,” employing a “gradual deployment and long-term holding” strategy. After the correction, a medium- to long-term allocation window will open, suitable for buying physical gold or gold ETFs on dips, avoiding leverage, and keeping holdings at 5%-10% of total assets.