A sudden geopolitical shock emerged! On February 28 local time, the United States and Israel launched a joint military operation against Iran. Prior to this, rising risk-aversion sentiment had already been pushing up prices of gold and other precious metals. Wind data shows that on February 27, London spot gold closed at $5,278 per ounce, after touching an intraday high of $5,281 per ounce. Spot silver once broke through $94 per ounce.
Since the start of 2026, gold price movements have entered a phase of mixed bullish and bearish forces influenced by multiple factors. Looking at international gold prices, after hitting a high at the end of January, COMEX gold futures experienced a significant correction to around $4,700 per ounce, before gradually stabilizing and recovering. Entering late February, driven by factors including heightened geopolitical risk aversion, the rebound momentum in gold prices became pronounced.
Analysts note a distinct difference in this geopolitical conflict compared to past events: precursors to most previous conflicts were relatively subtle, whereas signals related to this clash were evident as early as Friday. If the conflict is short-lived, or if market participants widely expect its duration to be limited, it could lead the market to perceive that the "conflict is over."
It is noteworthy that after rising on February 28, the gold grey market experienced a sharp drop on March 1. Industry insiders stated that pricing in the gold grey market, which operates on non-mainstream trading platforms primarily to弥补 trading hour limitations of major platforms, generally does not hold pricing power for commodities like gold. Its influence on the trajectory of mainstream gold prices is relatively limited.
Although financial markets were closed over the weekend, market anticipation for post-opening price action next week continues unabated. There is a broad consensus that the intensity and persistence of this Middle East conflict will be the core variable determining the direction of global financial markets in the coming week.
The impact of geopolitical conflicts on gold prices tends to be pulse-like, analysts suggest. In the short term, a surge in risk-aversion sentiment can drive a phase of price increases. However, as conflict intensity moderates, gold price movements typically gradually stabilize.
The conflict directly triggered a pulse-like surge in market risk aversion, pushing gold prices higher in volatile trade. The short-term trajectory of gold prices now highly depends on the intensity of Iran's retaliation and the potential spread of the conflict. If Iran coordinates retaliatory strikes with groups such as the Houthis in Yemen, Shia militias in Iraq, and Hezbollah in Lebanon against U.S. and Israeli targets, further escalation of geopolitical tensions would likely propel gold prices to continue rising.
Furthermore, if critical shipping lanes like the Strait of Hormuz or the Red Sea are blocked, disruptions to航运 combined with constrained energy supplies would create a dual driver of risk aversion and inflation, potentially leading to a breakout surge in gold prices. Conversely, if the conflict remains a localized skirmish and a ceasefire agreement is reached swiftly, the market's risk premium would likely dissipate quickly, causing gold prices to retreat and give up previous gains. Attention is also on the potential for diplomatic de-escalation arising from technical negotiations in Vienna. In the short term, gold prices are expected to maintain high volatility.
Historical experience indicates that the impact of geopolitical conflicts on gold prices is typically short-lived. If the conflict's duration is brief, or market expectations point to a limited cycle, it might foster a perception that the 'conflict has ended.' Against this backdrop, a short-term decline in gold prices cannot be ruled out, even if sporadic geopolitical clashes persist.
Affected by prolonged high tariff policies, the U.S. core PCE price index rose to 3% in December 2025, up from 2.8% and exceeding market expectations of 2.9%. Simultaneously, the combination of stubbornly high inflation and a government shutdown contributed to U.S. Q4 GDP growth slowing to just 1.4%, the largest quarterly decline since 1994 and far below the 3% market forecast. Volatility in tariff policies also poses greater challenges for the Federal Reserve in assessing inflation levels and interest rate prospects, further complicating judgments on gold price trends.
The uncertainty stemming from 'Trump 2.0 policies' since 2025 is a key variable currently influencing gold's trajectory. This conflict is unfolding against the backdrop of this overarching theme of policy uncertainty. On one hand, relevant rulings by the U.S. Supreme Court on tariffs have somewhat curbed this uncertainty. On the other hand, as midterm elections approach, such uncertainties are likely to amplify significantly. Should the conflict become prolonged, the U.S. Congress would likely question any presidential action to initiate warfare without congressional approval, potentially creating additional downward pressure on gold prices.
With the Middle East situation deteriorating rapidly, concerns about direct threats to crude oil supplies are intensifying. Whether this geopolitical conflict will impact international oil prices, and consequently global inflation expectations, remains to be seen. By the close on February 27, international oil prices had already shown significant movement: U.S. WTI crude futures settled at $67 per barrel, up 2.8%, while London Brent crude futures for April delivery settled at $72.48 per barrel, a gain of 2.45%.
Following the death of Iran's Supreme Leader Khamenei, market expectations initially leaned towards a swift resolution of the conflict. A reversal of this expectation would be reflected in gold prices. If it is further confirmed that Iran achieves a stable political transition post-Khamenei, capital markets could experience a comprehensive reversal of expectations, manifesting as synchronized declines in gold and oil prices and rising share prices, particularly in U.S. industrial sectors. However, war is inherently highly uncertain, and Khamenei's death could also plunge Iran's situation into further chaos.
From a medium to long-term perspective, the impact of this geopolitical conflict on gold prices crucially depends on whether it significantly impacts international oil prices. This aspect is particularly salient for a conflict related to a core oil-producing region like the Middle East.
During the 2022 Russia-Ukraine conflict, risk aversion dominated initially, pushing international gold prices to successive record highs. However, as the conflict persistently drove up international oil prices, the oil price surge fed into U.S. inflation, prompting the Fed to shift from modest to aggressive interest rate hikes. Consequently, after a short-term rise early in the 2022 conflict, international gold prices fell by approximately 20% in the second and third quarters as the conflict prolonged. This decline was not primarily due to fading risk aversion but rather because the conflict, via its impact on oil prices and inflation, ultimately altered market expectations for Fed monetary policy. The current market environment shares several similarities with 2022.
This conflict holds particular significance for oil markets. In an extreme scenario where the Strait of Hormuz is blocked, a sharp spike in international crude oil prices is highly probable. The Strait of Hormuz handles about 20% of global crude shipments; its security is a key variable for oil prices. A blockage could push prices above $80 or even $100 per barrel, significantly impacting global inflation expectations and central bank monetary policies.
Since the beginning of 2026, the international gold and silver markets experienced an 'epic rally' followed by a sharp plunge. Prices have been gradually rebounding since February, with spot gold climbing back above $5,200 per ounce, resembling a roller-coaster ride. The prevailing industry view is that the underlying logic supporting the gold bull market remains intact. Over the medium to long term, factors such as the Fed's interest rate cutting cycle reducing the opportunity cost of holding non-yielding assets, sustained central bank gold purchases, geopolitical tensions, and the 'de-dollarization' narrative are expected to continue supporting the bull market.
Many futures analysts generally believe the short-term impact of this geopolitical conflict on gold prices may be relatively limited. The long-term impact requires further assessment based on how the situation evolves.
Geopolitical conflicts tend to have limited trend-influencing effects. Numerous conflicts in the Middle East over recent years have had limited impact, especially on gold price trends, primarily for two reasons: their short duration and lack of severe disruption to international oil markets. From this perspective, if the current conflict prolongs and spills over to affect oil prices, it could negatively impact gold's medium-term trend. However, this impact likely would not alter the overall direction of the gold bull market. A spillover causing oil price increases might trigger a medium-term correction in gold prices of around 20%, similar to the pattern observed in 2022.
The long-term impact of the conflict hinges crucially on whether the U.S. deploys ground troops into Iran. Given the rapid advancement of U.S.-Israel strategic objectives, the short-term impact on gold prices might be relatively limited. The long-term impact requires judgment based on subsequent developments, particularly focusing on the extent of U.S. involvement in Iran's domestic situation.
Over the medium to long term, the Trump administration is expected to continue vying for foreign influence and resources, sustaining international uncertainty which underpins gold prices. Coupled with the reshaping of the international monetary order being a key global theme in 2026, damaged U.S. dollar credibility, and heightened U.S. fiscal risks, the continuation of the Fed's rate-cutting cycle further reduces the opportunity cost of holding gold. Persistently high gold purchasing demand from global central banks, driven by strategic considerations and deepening de-dollarization trends, resonates to solidify the foundation for gold's medium to long-term appreciation.
It is important to note that short-term gold prices have accumulated substantial gains. Caution is warranted against the risk of a sharp correction should geopolitical tensions recede, and chasing the rally requires care. Nonetheless, against a backdrop where geopolitical uncertainties persist, U.S. dollar credibility weakens, and medium to long-term supportive factors like central bank buying remain fundamentally unchanged, gold's medium to long-term allocation value remains prominent. It continues to be a core asset for hedging against global systemic risks.
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