Gold Navigates Crosscurrents of Stagflation Fears and Geopolitical Calm

Gold's Q2 strength is fueled by U.S. stagflation signals and institutional ETF demand, even as Middle East de-escalation hopes pressure its risk premium. Key data and a Trump speech on Iran loom.

Gold markets have opened the second quarter with significant strength, propelled by a complex and unusual set of opposing forces. The precious metal is finding support from emerging stagflation signals within the U.S. economy, even as nascent hopes for de-escalation in the Middle East work to suppress its traditional risk premium.

Institutional Demand Provides a Solid Foundation

Current data underscores sustained interest from major investors. According to the World Gold Council, physically-backed gold ETFs absorbed 78 tonnes during the first two months of 2026—a 73% increase compared to the same period last year. Holdings of the SPDR Gold Shares fund have risen to 920 tonnes, while the iShares Gold Trust recorded net inflows of $2.8 billion throughout the first quarter.

Despite this underlying support, March proved challenging for the spot price, which fell approximately 14.6% from February's level. This marked the largest monthly decline since October 2008. The current price remains about 18% below the all-time high of $5,598 reached in late January. The Relative Strength Index (RSI) has now recovered from oversold territory and is hovering near 47.

The Geopolitical Catalyst

A broad market rally was triggered today by former President Trump's announcement that he anticipates a withdrawal of U.S. forces from Iran within "two or three weeks," coupled with reports suggesting negotiation readiness from Iranian President Pezeshkian. The S&P 500 advanced 2.9 percent, while oil prices reversed sharply downward—WTI crude fell to $101.38, and Brent lost 3.2%.

For gold, this creates a mixed picture. Receding geopolitical tensions typically reduce its safe-haven appeal. However, concurrent U.S. macroeconomic data provides arguments for continued gold demand. The ISM Manufacturing PMI climbed to 52.7% in March, indicating the overall economy has now expanded for 17 consecutive months. Meanwhile, the Prices-Paid sub-index continues to signal elevated cost pressures, highlighting a stagflationary backdrop ahead of Friday's Non-Farm Payrolls report.

The yield on the 10-year U.S. Treasury note fell by roughly 20 basis points yesterday to approximately 4.13%. This decline reflects both weaker-than-expected JOLTS job market data and the growing hopes for de-escalation. Historically, falling yields have been favorable for inflows into gold-backed exchange-traded funds.

The Evening Wildcard

The trajectory for the remainder of the trading session will be heavily influenced by Trump's scheduled national address on Iran at 9:00 PM ET. Confirmation of an accelerated troop withdrawal would likely extend the market's recovery, while a renewed escalation could completely reverse it. The next substantial U.S. data release will be Friday's NFP report, though trading on the NYSE and Nasdaq will be halted for Good Friday. The first regular U.S. cash session will therefore not occur until Monday, April 6th.