Gold Plunges by the Largest Drop in 17 Years! Under the Impact of the Iran War, the Logic Behind Safe-Haven Assets Reverses

Gate News message: Amid ongoing instability in the Middle East situation, the gold market has seen sharp volatility. Although in early trading on Tuesday the gold price rebounded slightly to about $4,553 per ounce, the month-to-date decline is expected to reach 14.6%, or to mark the largest single-month drop since the 2008 financial crisis. The current Iran war has entered its fifth week, and the military and diplomatic contest between the United States and Iran is still ongoing, further increasing market uncertainty.

U.S. President Trump has recently issued signals of de-escalation, saying he is willing to end the military confrontation, but at the same time warning that the scope of strikes would be expanded if negotiations fail. Meanwhile, the United States has deployed more military forces to the Middle East, indicating that the risk of escalation remains. Geopolitical conflict is driving oil and gas prices higher, worsening inflation expectations; the market has repriced the expected path of future rate hikes, directly suppressing gold performance.

From an asset-pricing perspective, gold is reverting to a traditional framework. Wayne Nutland noted that against the backdrop of bond yields and the U.S. dollar moving higher in tandem, gold has once again demonstrated negative correlation. The so-called “de-anchoring rally” over the prior two years, driven by global uncertainty, is now being corrected. In addition, Ian Barnes believes that over the past several years, large volumes of institutional capital flowed into gold, significantly amplifying its volatility; once market sentiment shifts, profit-taking will rapidly magnify the magnitude of the selloff.

It is also worth noting that this round of adjustment is closely tied to positioning structure. The market had previously been overallocated to gold; when a strengthening dollar coincided with a decline in risk appetite, capital quickly withdrew, creating a stampede effect. A similar scenario occurred around the time of 2008, when gold and other commodities fell in tandem.

However, multiple institutions still remain optimistic about the long-term outlook. Analysts believe that continued reserve diversification by central banks across countries, along with a potential easing cycle in monetary policy, could provide support for gold prices. Some forecasts show that by the end of 2026, gold may still have room to test the $5,400 level. But in the short term, if tensions in the Strait of Hormuz persist, gold could still face further pullback pressure. (CNBC)