Gold Crashes Over 5%: Why Is War Sending Prices Down, Not Up?

Gold prices, which had continued their 2025 rally into early 2026 and surged nearly 30% within a single month, subsequently entered a corrective phase and plunged sharply following the outbreak of the US-Iran War. As of 14:30 Taiwan time on March 23, spot gold had fallen more than 5%, breaking below $4,250 per ounce and erasing all of this year's gains.

Gold has now declined for nine consecutive trading sessions, recording its largest single-week loss since 1983. The metal's traditional safe-haven appeal has been undermined by the outbreak of conflict in the Middle East, which has driven oil prices higher and raised inflation risks — factors that analysts say are complicating rate-cut prospects at the Federal Reserve (Fed) and other major central banks. Because gold produces no yield, a higher-for-longer interest rate environment erodes its relative attractiveness.

Beyond monetary policy uncertainty, market observers attribute part of the selloff to forced liquidation. Investors facing losses elsewhere in their portfolios have sold gold holdings to meet margin calls on other assets, analysts say. （Related： TSMC Chairman C.C. Wei Says Robot “Brains” Matter More Than Show ｜ Latest ）

Gold's high liquidity appears to have worked against it during this risk-off episode, according to the chief market analyst at KCM Trade. "Equity market declines have dragged gold into the selloff, as traders use it to cover margin requirements on other positions," the analyst said.

The scale of the gold selloff is not without precedent, but the speed is exceptional compared with most historical episodes, Wayne Gordon, investment advisor at UBS Wealth Management, said.

There is historical basis for gold's initial decline in response to economic shocks, David Wilson, director of commodities strategy at BNP Paribas, said. Reviewing the shock cycles of 2008, 2020, and 2022, Wilson noted that gold initially fell in each case as markets absorbed the news and investors rotated into the US dollar — before ultimately resuming an upward trend.

The trajectory from here depends on who is selling and why, James Mackintosh, senior markets columnist at The Wall Street Journal, argued. "As with all assets, once the crowded trade unwinds, prices can return to a path determined by fundamentals," Mackintosh said.

For gold, those fundamentals are inflation, interest rates, and geopolitical risk. How many buyers who entered the market in recent years still need to exit remains unknown. "If those sellers include central banks, prices could fall considerably further before gold regains its luster," he said.

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