A Shift in Haven Assets: Gold's Unexpected Decline Amid Conflict

Gold prices hit 4-month lows as the strong US dollar and high Treasury yields replace it as the safe-haven asset. Analysts see a correction, not a trend reversal, with major banks holding bullish long-term targets.

The dynamics driving the gold market have taken a counterintuitive turn in recent weeks. While geopolitical turmoil typically fuels demand for the precious metal, the current climate is having the opposite effect, pushing prices to four-month lows.

The Dollar Claims the Safe-Haven Crown

A military conflict between the U.S., Israel, and Iran, which commenced with airstrikes in February 2026, has sent oil prices soaring above $112 per barrel. This surge in energy costs is reigniting inflationary pressures, compelling the U.S. Federal Reserve to postpone its anticipated interest rate cuts. Futures markets for the Fed funds rate now price in zero cuts for 2026, a stark reversal from expectations of up to three reductions at the start of the year.

"The dollar has been the ultimate safe haven during this conflict," observed Daniel Ghali, Senior Commodity Strategist at TD Bank. "This is detrimental for gold, which held that role throughout the previous year." The same war is propelling the U.S. dollar higher while simultaneously weighing on gold.

Further pressure originates from Treasury yields. A hotter-than-expected February Producer Price Index (PPI) reading of +0.7% drove the yield on the benchmark 10-year U.S. Treasury note to 4.42%—its highest level since July 2025. For a non-yielding asset like gold, this translates to rising opportunity costs and persistent selling pressure.

Technical Weakness and a Historic Sell-Off

From a technical perspective, the picture remains strained. Gold plummeted approximately 11% during the week of March 18-20, marking its worst weekly performance since 1983. Since the conflict began, the total decline exceeds 14%. The price has decisively broken below its 50-day moving average at $4,960, and the Relative Strength Index (RSI) has fallen to its lowest point since November 2024.

After briefly touching $4,099, the price has found some stability around $4,388. Technically, the metal is now in open space between the breached Fibonacci level at $4,654 and the next significant support zone near $4,361.

Market strategists are interpreting the dramatic move as a correction rather than a trend reversal. Dilin Wu, a strategist at Pepperstone, characterized the decline as "a recalibration of price logic, not a reversal of the long-term trend." Major banks share this outlook, maintaining bullish long-term price targets: J.P. Morgan forecasts $6,300 by end-2026, UBS projects $6,200, Goldman Sachs sees $5,400, and Deutsche Bank anticipates $6,000. In the near term, direction will likely be dictated by the upcoming U.S. PMI data for March and further developments in the Iran conflict.