Gold falls below $4,600, silver plunges 10%, and U.S. stock index futures decline across the board

Why Has Gold Lost Its Safe-Haven Appeal Amid the U.S.-Iran Conflict?

Reporter | Hu Guangqi Jin Shan

Editor | Hong Xiaowen Jiang Peixia Zeng Tingfang

On the evening of March 19, gold and silver prices sank further. As of 20:40 Beijing time, spot gold fell by 4.8% intraday, dropping below the $4,600 mark. Spot silver saw a decline of over 10%, priced at $67.4 per ounce.

Meanwhile, Dow Jones index futures dropped 0.57%, S&P 500 index futures fell 0.57%, and Nasdaq 100 index futures decreased by 0.65%. The U.S. stock market fear index VIX rose by 1.56 points, reaching 26.65 points.

The U.S.-Iran conflict continues; why isn’t gold rising but instead falling?

Have you noticed this phenomenon? Since the onset of the U.S.-Iran conflict, gold, which is considered the most important safe-haven asset, has not surged as many expected, but has instead been on a downward trend recently. What is going on? Has the logic of “when guns fire, gold is worth a fortune” failed? What are the underlying reasons?

At the beginning of March, when the U.S.-Iran conflict first erupted, market panic intensified, and under the influence of risk aversion, gold nearly approached $5,400 per ounce. However, after peaking on March 2, it began a downward trend. The reasons for gold’s decline instead of an increase can be attributed to three main factors:

First, the brief surge in gold after the conflict broke out led to a significant number of profit-taking, creating strong selling pressure that effectively suppressed gold prices.

Second, the current market trading logic suggests that a blockade of the Strait of Hormuz could lead to a sharp rise in oil prices, causing market concerns about inflation in the U.S. If the conflict escalates, oil prices are likely to continue rising, which would place substantial pressure on U.S. prices. The Federal Reserve would then have to consider potential imported inflation when formulating monetary policy, making it likely to delay interest rate cuts. Therefore, this round of gold price decline is fundamentally influenced by the postponement of interest rate cuts by the Federal Reserve.

Third, the speculative nature of gold is becoming increasingly pronounced. Generally, gold, as a safe-haven asset, should maintain stable prices. However, we have seen that since the Federal Reserve began its interest rate cut process last year, gold prices have been on the rise, with increasing volatility. Currently, the share of quantitative funds in the gold market is very high. The quantitative strategies and leveraged positions of these funds exhibit strong pro-cyclical characteristics, which simply means they amplify both rises and falls. As a result, the current gold market is less about its safe-haven attributes and much more about speculation, marking a significant change in the gold market since 2025.

If the U.S.-Iran conflict cannot ease in the short term, the market’s current concerns about “stagflation” will accelerate. The conflict will lead to rising oil and related industrial prices, essentially a “supply shock.” If the Strait of Hormuz remains blocked, oil transportation will be hindered, and if countries do not release their strategic oil reserves in a timely manner, oil supply will decrease, leading to continued oil price increases, resulting in inflation plus stagnation in economic growth. Under this context of stagflation concerns, related economic entities’ stocks and bonds will be adversely affected. Furthermore, although gold is a safe-haven asset, it is relatively difficult to liquidate, which is why gold has not been as attractive recently.

Currently, under the logic of supply shock and stagflation trading, both gold and global stock and bond markets have been significantly impacted. For ordinary investors, participating in gold and silver investments requires caution due to the current high volatility, which can easily lead to losses. In the future, it is essential to keep an eye on three aspects: first, U.S. inflation data; second, whether the Federal Reserve’s monetary policy will turn hawkish; third, the situation around the Strait of Hormuz and oil prices. The situation remains unclear, and whether investing in precious metals or the stock and bond markets, investors should prioritize risk control over profit-making.

Yue Sheng Investment Research: Popular Topic Company Clue Extended Reading

(Disclaimer: The content of this article is for reference only and does not constitute investment advice. Investors should bear the risk of their actions based on this.)