Gold Faces Significant Decline Amid Geopolitical Tensions
Gold has experienced its largest monthly drop since 2008, primarily driven by a historic energy supply crisis linked to the Iran conflict, which has unsettled investors who were anticipating interest rate reductions.
Forecasts indicate that spot prices could decrease by 14.6% in March—the steepest monthly drop since October 2008, when gold fell by 16.8% during the Great Recession.
As of around 12:15 p.m. ET on Tuesday, gold futures increased by 1.9% to $4,646.10 an ounce. Concurrently, the Dow Jones Industrial Average gained 514 points, or 1.1%, encouraged by President Trump’s remarks that the conflict in Iran might be drawing to a close.
Despite this slight uptick, there are ongoing investor concerns regarding inflation. Rising prices could postpone interest rate cuts, thereby adversely affecting gold, which tends to thrive when rates are lower.
Interestingly, one would think that geopolitical instability would boost gold’s appeal, but the crisis in the Strait of Hormuz has pushed oil prices above $100 per barrel. This has reignited worries about inflation, seen in rising gas prices, which hit $4 a gallon—marking the highest point since 2022.
Kenin Spivak, CEO of SMI Group, commented on the situation saying, “As long as the dollar keeps strengthening, and the perception is that the Iran war is localized and short-term, along with higher interest rates, gold will likely remain weak.”
Prior to the U.S. and Israel’s attack on Iran on February 28, the market largely foresaw two rate cuts in 2026. However, recent indications from the Federal Reserve suggest only one will occur this year.
Just last Friday, traders believed there was over a 50% chance of a rate hike this year; however, those expectations shifted sharply after Federal Reserve Chairman Jerome Powell stated that there wasn’t a need for rate increases.
Tracy Schuchart, a senior economist at NinjaTrader, noted that this decline is not necessarily a signal of a trend reversal but rather creates a “highly attractive accumulation opportunity” reminiscent of late 2023. She observed that “the departure of leveraged speculative investments and momentum-chasing investors sets a strong foundation for future growth.”
Goldman Sachs upheld its forecast, predicting that gold prices could reach $5,400 per ounce by late 2026.
Yet, uncertainties linger about the duration of the Iran conflict and whether oil prices might continue to rise long after it concludes, especially given the time needed to repair energy infrastructure in the region.
President Trump recently stated a deal with Iran is “probably” near but issued a warning that should an agreement for reopening the Strait of Hormuz not be reached within a week, the U.S. would target Iranian energy facilities.
Although the president expressed readiness to halt military operations against Iran, even if the strategic Strait remains largely closed, the White House did not provide immediate comments when approached for clarification.
On a related note, Army Secretary Pete Hegseth mentioned that discussions with Iran are “very real” and gaining traction, though Iranian officials have denied any such negotiations.
In the meantime, reports indicate President Trump is deploying thousands of troops to the Middle East, including 2,500 Marines. The implications of this move—whether it is an escalation or a deterrent against further Iranian aggression—remain unclear.
