Gold Falls 3%, Nearly Erasing This Year's Gains
Gold prices fell sharply on Monday, nearly erasing this year's gains, as the Iran war entered its fourth week and the US and Iran exchanged threats of new attacks. Bullion briefly plunged as much as 3.8% to US$4,320.30 per ounce—just slightly above its closing level at the end of last year.
The surge in oil prices since the conflict began has increased inflation risks and reduced the chances of an imminent interest rate cut by the Federal Reserve or other central banks. The "higher for longer" environment has weighed on non-yielding gold. Gold has fallen for eight consecutive sessions and just recorded its biggest weekly decline since 1983, indicating that selling pressure remains dominant.
The volatile early moves reflect broader market conditions: oil fluctuated near its highest closing level since mid-2022, while equities were also volatile. In the three weeks since the war began on February 28, gold's decline has been driven by forced selling as investors sought liquidity to cover losses in other assets.
From a geopolitical perspective, President Donald Trump gave Iran a two-day deadline to reopen the Strait of Hormuz or face bombing of power plants. Iran responded by saying it would "completely" close the waterway and target energy, information technology, and desalination infrastructure if its power facilities were attacked. This escalation of threats has prolonged uncertainty and kept energy risk premiums high.
Some analysts believe this pattern has precedent. BNP Paribas noted that in major shock cycles (2008, 2020, 2022), gold often declines in the initial phase as investors chase the US dollar, before eventually recovering in a more sustained rally. However, UBS emphasized that while the magnitude of the decline is not unprecedented, the pace of this correction is faster than in many historical episodes.
Technically, the 14-day Relative Strength Index (RSI) fell below 30, approaching the "oversold" area frequently monitored by traders. Positioning data also showed large speculators increasing their net-long positions to a seven-week high as of March 17, indicating that some market participants are beginning to see room for a rebound. At 11:37 a.m. in Singapore, spot gold fell 3.3% to US$4,345.45; silver fell 4% to US$65.26, while the Bloomberg Dollar Index rose 0.1%.
Source: Newsmaker.id
