This morning, gold prices dropped sharply again.

GateUser-bd883c58 · 2026-03-23T23:13:20+00:00

Despite escalating geopolitical tensions in the Middle East, international gold prices experienced an unexpected decline, primarily because market focus shifted from "geopolitical hedging" to "inflation expectations and monetary policy." The possibility of central bank rate hikes has enhanced the appeal of yield-bearing assets, while a stronger U.S. dollar has suppressed gold demand. Despite the short-term decline, major institutions remain optimistic about gold's long-term prospects.

GateUser-bd883c58

2026-03-23 23:13:20

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Why does geopolitical tension lead to an abnormal decline in gold prices?

On March 23, international gold prices dropped sharply again. As of 10:10 a.m., COMEX gold briefly fell to $4,322 per ounce, down more than 5%; London spot gold briefly dropped to $4,318.825 per ounce, a decline of over 3%.

According to First Financial, just last week, international gold prices experienced a cliff-like plunge.

By March 21, Beijing time, the London spot gold price fell below the key level of $4,500 per ounce, with a weekly decline of 10.49%, marking the largest weekly drop since March 1983.

Despite ongoing tensions in the Middle East, gold, traditionally a safe-haven asset, has performed “unusually” poorly. What are the reasons behind this?

According to CCTV Finance, analysts point out that the main reason is that market trading has shifted from “geopolitical safe-haven” to “inflation expectations and monetary policy battles.” The recent conflict in the Middle East has ignited the oil market, quickly fueling strong concerns about a resurgence of global inflation.

Faced with the potential risk of stagflation, central banks in major economies worldwide may need to reassess their monetary policy paths. Currently, the CME FedWatch Tool shows that the market expects less than a 10% chance of the Federal Reserve cutting interest rates this year, and there is even a possibility of rate hikes. This increases the attractiveness of interest-bearing assets like bonds, while gold, which does not generate interest, becomes less appealing. Meanwhile, the recent strengthening of the US dollar index has suppressed gold demand, putting downward pressure on gold prices.

Despite the short-term sharp decline, many Wall Street institutions remain optimistic about the long-term prospects of gold. Analysts believe that ongoing central bank gold purchases, de-dollarization trends, and geopolitical uncertainties will continue to support gold prices. JPMorgan still forecasts that gold futures could reach $6,300 per ounce by the end of 2026, while Deutsche Bank maintains its long-term target price of $6,000 per ounce.

Source: China News Service, combined reports from First Financial and CCTV Finance

Editor: Yan Jiaxin

Chief Editor: Zhao Yifan

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