Gold futures plunged as much as 7% on Monday morning, erasing all 2026 gains and extending a brutal selloff that has shattered the metal’s status as a geopolitical safe haven.
Spot gold dipped below $4,320 per ounce — barely above year-end 2025 levels, as the U.S.-Israel military campaign against Iran dragged into its fourth week.
The decline caps one of the sharpest drops in gold’s modern history. The metal has shed roughly 14% since the conflict erupted on February 28 with Operation Epic Fury, a barrage of nearly 900 strikes on Iranian military sites and leadership. Gold had peaked at a record $5,589 per ounce in late January.
The unraveling stems from gold’s overcrowding as a “fashionable trade,” per a Wall Street Journal analysis. Generalist funds, systematic hedge funds, and retail investors flooded in during last year’s 53% rally.
As war disrupted 20% of global oil supply via the Strait of Hormuz, gold became the go-to asset for de-risking portfolios and meeting margin calls. It tumbled not just in dollars but across pounds, euros, and yen, underscoring broad liquidation pressures.
Central bank buying faces strain from oil shock
Structural demand from central banks, which snapped up 850 tonnes in 2025 amid frozen Russian assets, now hangs in the balance. Oil-importing nations — key buyers — grapple with Brent crude up over 50% since mid-February, diverting reserves from gold to fuel imports, Yahoo Finance reports.
Fed’s hawkish stance fuels further headwinds
Interest rate bets have flipped too. Inflation from soaring energy costs has sidelined Federal Reserve rate cuts, holding the benchmark at 3.50%–3.75%. Markets see a 50% chance of a hike by October, boosting bond yields and the dollar — both gold killers
.JPMorgan analysts stay bullish long-term, betting prolonged disruptions will revive gold’s appeal. Yet today, the crisis asset has become its biggest victim.
