Gold prices tumbled sharply on Monday, extending a historic rout as investors recalibrated expectations for global interest rates amid an escalating conflict involving Iran and its regional rivals.
Spot gold fell as much as 8% intraday to $4,097.99 per ounce, its lowest level since November, before trimming losses to trade around $4,203.21. The decline marks a ninth consecutive session of losses and follows a drop of more than 10% last week, the steepest weekly fall since 1983. From its January peak of $5,594.82, bullion has now shed roughly a quarter of its value.
U.S. gold futures mirrored the selloff, falling more than 8% to $4,205.10, as the market rapidly unwound positions built during months of strong safe-haven demand.
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The reversal has been driven less by a collapse in risk and more by a shift in the macroeconomic outlook. Oil prices, held above $100 a barrel by disruptions linked to the conflict and the effective shutdown of the Strait of Hormuz, have intensified inflation concerns. That, in turn, has pushed investors to reassess the path of monetary policy.
“With the Iranian conflict into its fourth week, and oil prices hanging around the $100 level, expectations have pivoted from rate cuts to potential rate hikes, which have tarnished gold’s appeal from a yield point of view,” said Tim Waterer, chief market analyst at KCM Trade.
Gold, which does not offer interest income, typically benefits from lower rates. The prospect of tighter policy has reversed that dynamic, strengthening the U.S. dollar and increasing the opportunity cost of holding bullion.
Market pricing now suggests a growing belief that the Federal Reserve could raise rates rather than cut them by the end of 2026, according to futures data tracked by CME’s FedWatch tool. That shift has become the dominant force in gold markets, overshadowing its traditional role as a hedge against geopolitical instability.
Market mechanics have also amplified the selloff. As equities declined across Asia and other regions, investors moved to liquidate gold holdings to meet margin calls elsewhere.
“Gold’s high liquidity appears to be hurting it during this risk-off period. Downturns in stock markets are leading to gold portions being closed to cover margin calls on other assets,” Waterer said.
Other precious metals followed gold lower. Silver dropped 6.1% to $63.66 per ounce, platinum fell 6.4% to $1,799.25, and palladium declined 3.6% to $1,352.75, with all three touching multi-month lows during the session.
The sharp correction has raised questions about gold’s safe-haven status, but some market participants argue the current downturn is consistent with past crisis cycles rather than a structural breakdown.
Peter Schiff, chief economist at Euro Pacific, said the market reaction is misaligned with underlying risks.
“If you were bullish on gold before the war, you should be more bullish now. The war means soaring U.S. budget deficits, skyrocketing food & energy prices, recession, rising unemployment, collapsing stock, bond, & real estate prices, increased terrorism, and a financial crisis,” he said.
Schiff pointed to historical precedent. “In the early months of the 2008 GFC, gold crashed 32%, about 40% of its prior bull-market gain. After gold bottomed, it surged 178% over the next three years. Gold nearly hit $4,100 today, down 27%, about 40% of its gain since $2K. A 178% surge from that low puts gold at $11,400.”
He added, “Falling real rates are bullish for gold. It’s the stock market that needs rate cuts. That’s why it makes no sense that stocks are down so little.”
For now, the market is trading on immediate pressures rather than longer-term narratives. Elevated oil prices, driven by supply disruptions and threats to Gulf infrastructure, are feeding inflation expectations. That has forced a repricing of interest rate trajectories, weakening gold even as geopolitical risks intensify.
The result is a reversal of the pattern that typically defines periods of crisis. Instead of rising alongside uncertainty, gold is being pulled lower by the same forces, higher energy costs, and tighter financial conditions that are unsettling broader markets.
However, market analysts believe that if the conflict continues to push inflation higher and central banks maintain a hawkish stance, gold could remain under pressure. But if growth weakens sharply and rate expectations reverse, the metal may find support again, as it has in previous cycles.