Recently, geopolitical conflicts in the Middle East have intensified; however, the price trend of gold, a traditional safe-haven asset, has not continued to rise as expected. Following the strikes launched by the U.S. and Israel against Iran at the end of February, gold prices rose briefly but subsequently faced significant selling pressure. Currently, gold prices are fluctuating in the range of $5,050 to $5,200 per ounce, indicating that the market's reaction to this crisis differs from the past.

Gold Volatility and Safe-Haven Demand in the Early Stages of Conflict

After the U.S. and Israel took military action against Iran on February 28, gold prices once climbed from $5,200 to over $5,400 per ounce. This initial reaction aligned with the historical pattern where geopolitical turmoil drives capital toward traditional "safe-haven assets." However, this rally failed to sustain. In early March, gold prices immediately faced a decline of over 6%. As of press time, spot gold (XAU) was trading at $5,096. This demonstrates that in the current macroeconomic environment, geopolitical risk alone is no longer an absolute driver sufficient to support a unidirectional rise in gold prices.

Strong Dollar and Treasury Yields Suppress Gold Trends

The primary reason for gold's recent lack of upward momentum lies in the strong dollar and rising U.S. Treasury yields. Due to the increased risk of shipping disruptions in the Strait of Hormuz, international crude oil prices have risen, leading the market to expect prolonged inflationary pressure. To combat potential inflation, central banks may need to maintain higher interest rates. Consequently, the opportunity cost of holding gold—which does not yield interest—increases correspondingly, thereby weakening the market's willingness to allocate funds to it.

Liquidity Tightening and Institutional Safe-Haven Selling

Beyond interest rate factors, the market's liquidity status is also key. Ross Norman, CEO of the precious metals website Metals Daily, noted that sudden international conflicts often trigger a certain degree of market panic. In a liquidity crunch, traders are forced to sell highly liquid assets, including gold, to meet margin calls or rebalance portfolios. This widespread selling phenomenon explains the decline in gold prices during the early stages of the conflict, which contradicts the standard safe-haven logic. Additionally, the recent high volatility of gold prices has caused some large institutions to worry about holding physical gold, choosing to remain on the sidelines for now.

Long-Term Outlook and Forecasts from Foreign Institutions

Although gold faces significant volatility and macroeconomic headwinds in the short term, most foreign institutions maintain a positive view of its long-term trend. According to recent market reports, J.P. Morgan predicts that by the end of 2026, gold prices could reach $6,300 per ounce; Deutsche Bank also maintained its year-end target price of $6,000. This indicates that institutional investors assess that after digesting the short-term liquidity shock, gold will still play its role as an asset for hedging against extreme risks.

Disclaimer: None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy.