Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Why gold slides despite escalating geopolitical tensions
Replica gold bars are on display at a store in Manhattan, March 10. UPI-Yonhap
By Lee Yeon-woo
Hawkish Fed, strong US dollar override geopolitical fears: analysts
HONG KONG — Gold prices have continued to weaken despite escalating tensions in the U.S.-Israel conflict with Iran, breaking from the metal’s traditional role as a geopolitical hedge, as fading expectations of interest rate cuts and a stronger U.S. dollar weigh on sentiment, analysts said.
The metal has declined about 15 percent since a brief surge on March 2, when prices climbed to around $5,300 per ounce after the U.S. and Israel began their strikes on Iran. A modest rebound driven by technical buying on Friday did little to alter the broader downtrend, with prices ultimately falling to around $4,500.
Lynn Song, chief economist for Greater China at ING, described the downturn as “a bit of a pullback” following an overheated rally. Higher oil prices, which had contributed to a more hawkish global central bank outlook, had also weighed on gold, Song said, noting that the metal was a non-yielding asset.
Typically, a surge in oil prices fuels inflation, erodes the value of fiat currencies and supports gold as a key real asset. This time, however, the U.S. Federal Reserve’s delay in cutting rates has dampened investor sentiment. On Wednesday, the central bank held its benchmark rate steady at between 3.50 and 3.75 percent, while projecting higher inflation amid economic uncertainty linked to the conflict.
At the same time, a stronger U.S. dollar has added further pressure, according to a March 12 note from Swiss private bank Union Bancaire Privee (UBP). The dollar, which also serves as a safe haven asset, has gained more than 2 percent this month.
Analysts broadly view the decline as a short-term correction rather than a reversal of the longer-term uptrend. Gold prices remain up more than 25 percent over the past six months, and are still supported by structural factors such as sustained central bank buying.
Tang Yuxuan, Asia head of rates and FX strategy at J.P. Morgan Private Bank, said the metal has seen larger one-day pullbacks, including a 9 percent decline on Jan. 30.
“Larger price swings in gold have become more frequent,” Tang said, attributing the trend to rising retail participation since mid-2025 rather than any material shift in fundamentals.
Song also noted that the downturn had not significantly deterred gold investors in China, the world’s largest buyer of the metal, particularly those with a longer-term horizon.
In a separate note dated March 16, UBP said gold “tends to perform admirably as an inflation hedge during oil price shocks” and maintained its year-end forecast at $6,000 per ounce.
“Any decline in gold should be relatively short-lived, given the underlying robust demand narrative and the prospect of higher inflation over time,” UBP said.