Gold's safe-haven appeal fades as dollar strengthens
Gold plunged 11.3% in March, marking its steepest monthly decline since the 2008 global financial crisis. The ounce price fell to $4,099.52, its lowest since November 2025. Rising US dollar strength, higher bond yields, and liquidity needs drove the drop. Central banks' selling of gold also contributed. The precious metal had previously risen 12.42% in January and 8.9% in February.
Gold began 2026 with strong momentum, but the precious metal suffered an 11.3% plunge in March due to complex dynamics triggered by Middle East tensions. This marks the steepest monthly decline for gold since the 2008 global financial crisis. The ounce price fell to $4,099.52, its lowest level since November 2025.
Factors behind gold's decline
Strengthening of the US dollar, rising bond yields, and liquidity needs sent gold to its sharpest monthly drop last month. Escalating Middle East tensions continue to stoke global inflation risks. Rising bond yields due to higher oil prices, potentially intensifying inflationary pressures, expectations that the Federal Reserve will stop cutting rates this year, and increasing demand for the US dollar as a safe haven all contributed to gold's decline. Central banks' selling of gold also played a role.
Gold's strong start to 2026 reversed
Gold had begun the year with a bang, rising 12.42% in January – its best monthly performance since November 2009 – and 8.9% in February, giving it a seven-month winning streak for the first time in 53 years. Meanwhile, silver hit a record high of $121.7 per ounce, up 17.2% in January and 12.6% in February, but it fell 19.9% in March to $75.1.
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Expert analysis on market dynamics
Ole Hansen, head of commodity strategy at Saxo Capital, said gold suffered due to a combination of strong macroeconomic forces, temporarily weakening its traditional safe-haven feature as investors flocked to the US dollar. Hansen stated the decline was led by a significant repricing of rate expectations, rising energy prices stoking inflation fears, and rising bond yields in the US. He noted that rising bond yields increase the opportunity cost of holding non-yielding assets like gold, prompting investors to sell their holdings. Hansen added that the US dollar's strengthening due to global growth concerns and its safe-haven demand propelled the currency, making gold more expensive for investors trading in other currencies. He observed that the current situation is more supply-driven inflation rather than a demand-crushing crisis, and that unlike systemic crises where gold gains value as a hedge, the current crisis has resulted in widespread deleveraging. Hansen concluded that gold typically behaves more like a source of liquidity in such turbulent times instead of a safe-haven asset, so investors reduce positions to offset losses elsewhere.
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