Iran has squeezed gold: why the precious metal has collapsed in price
The price of gold has more than tripled over the past few years amid geopolitical turmoil. Nevertheless, in the case of the Iranian war, the rule "if it smells fried in world politics, take the gold" did not work. On the contrary, after a rapid rise to $5,400 per troy ounce, the precious metal lost about 15% of its value. Gold was one of the most affected assets in March. Izvestia found out whether this means that the market rally is closed, and the metal is not a "safe haven" for investors.
A painful fall
By mid-March, gold prices had dived below $4,200, recording a 16% drop and erasing all growth since the beginning of the year. The Vanda analytical group estimated that a whopping $10.8 billion was withdrawn from global gold ETFs in a matter of weeks. For retail investors, it looked like the capitulation of the main safe haven asset. The real picture, however, is much more complicated.
The first and main reason for the March collapse lies in the mechanics of institutional portfolios. When the financial system is hit by a shock (in this case, the threat of stagflation due to oil at $100), the stock and government bond markets begin to fall rapidly. At this point, margin calls are triggered for hedge funds and investment banks - brokers are demanding to deposit additional cash to secure unprofitable positions.
Where can I get liquidity in a general panic? Managers sell what can be implemented quickly and with maximum profit. Gold was perfect for this role. Throughout 2025, the metal demonstrated a phenomenal rally, gaining 65% in price against the background of structural demand from central banks and fears of the US government debt. In January 2026, an ounce was worth $5,594 at its peak.
In March, the institutions accumulated huge paper profits in gold bars and futures. The metal began to be aggressively sold off to cover financial holes on other fronts. Traders usually say this: "in a moment of acute crisis, you don't sell what you want to sell, but what has the most liquidity." Gold simply served as an ATM for the near-crisis financial system.
The dollar is above all
The second reason is purely macroeconomic in nature. The market is faced with a phenomenon that can be called the transformation of a geopolitical shock into an inflationary one. The signal transmission chain is as follows. The war is blocking the supply of Middle Eastern oil, and energy prices are rising, guaranteeing a new surge in global inflation. Until February, the markets were confident that the US Federal Reserve System (FRS) would carry out a series of base rate cuts in 2026. The energy crisis has destroyed these expectations: the Fed is forced to keep rates at high levels in order to keep prices from falling off the anchor.
For gold, the strict policy of the regulator is unpleasant. The metal is sensitive to real interest rates (government bond yields minus inflation). When the yield on American treasuries increases, capital flows into debt securities. Gold, being a physical asset, does not generate coupon income. In an environment where risk-free U.S. government securities offer high returns, it becomes economically impractical to hold capital in gold bars.
At the same time, expensive oil strengthened the position of the US dollar. The United States is facing this crisis as the largest net exporter of hydrocarbons. For the rest of the world, the need to buy expensive oil for dollars creates a huge demand for the American currency. A stronger dollar automatically puts pressure on commodities: a strong dollar always means cheaper gold for holders of other currencies.
Sale from the Central Bank
Additional pressure on the quotes was exerted by signs that national governments have also decided to take advantage of high prices to patch budget holes. In the era of militarization and the growth of defense budgets, gold reserves are turning into a tool for financing the army and the military-industrial complex.
The example of the Central Bank of Poland, whose leadership openly admitted the possibility of selling part of the gold reserve to cover military expenses, was indicative. According to HSBC strategists, current prices make profit-taking by the official sector a very likely scenario. States that have been accumulating bullion for decades are using the moment to monetize their reserves. However, there are no exact figures yet.: they will be clear after receiving statistics for March and the first quarter as a whole.
Will the bottom be redeemed
Does the March collapse mean that gold has lost its status as a defensive asset forever? Hardly. The current dynamics are a reaction to the acute phase of the crisis, which requires a reduction in leverage. The fundamental drivers that accelerated prices in 2024-2025 remain in force. The basic scenario of the global economy in the coming years is geopolitical fragmentation, de—dollarization of trade by developing countries, and the non-stop growth of sovereign debts. None of these factors have been negated by the strikes on Iran. On the contrary, the militarization of the Middle East and the possible stagflation in Europe only strengthen the arguments in favor of physical assets.
Therefore, the largest investment banks, despite the current drawdown, maintain aggressively bullish forecasts for the end of the year. UBS, in particular, holds the target at $6,200 per ounce by September, Deutsche Bank and Société Générale predict a rise to $6,000 by the end of 2026. Institutional investors view today's levels (near $4,200-4400) as a fair value zone and an excellent entry point.
To understand the future, it is worth turning to history. In the fall of 2008, at the very beginning of the acute phase of the mortgage crisis, gold collapsed by almost 30%. Investors liquidated their positions in the same way to save the cache. But within a few months, central banks launched printing presses, and the metal began a multi-year growth cycle.
Today we are witnessing a similar phase of shock. The market is being cleared of excessive speculative positions with leverage. As soon as the Fed is forced to soften its rhetoric under the weight of a slowing economy, and investors rebuild their portfolios to take into account new long-term inflation, the precious metal is likely to regain its status as the most reliable asset. In a world where fiat money is rapidly depreciating due to the cost of oil and ultra-soft fiscal policies, gold remains the only alternative insurance against political shocks.
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