Since the outbreak of the Iran conflict in late February, international gold prices have fallen by nearly 11%. However, for investors closely watching the precious metals market, the price correction is not the only focus—the sustained rise in crude oil prices is also building new momentum for gold's future trajectory. This article synthesizes recent market dynamics and insights from industry experts to detail the underlying logic of gold price fluctuations and analyze why the case for buying gold is re-emerging.
Gold prices have experienced a clear pattern of rising and then falling since the Iran conflict began in late February. The most actively traded June gold futures contract on the New York Mercantile Exchange settled at $4,693.70 per ounce on Monday, April 27, down about 1% for the day. Compared to the settlement price of $5,247.90 per ounce on February 27, the last trading day before the conflict, the current price represents a cumulative decline of approximately 10.6%.
Although gold prices initially rose on the first day of the conflict due to geopolitical safe-haven demand, the overall trend for March ultimately resulted in a loss of nearly 11%. According to Dow Jones Market Data, this was the first monthly decline since last June and the largest monthly drop in nearly 13 years. Measured from the intraday high of the most active contract, gold has retreated more than 12% from the historical peak of $5,626.80 per ounce reached on January 29.
Stefan Gleason, President and CEO of precious metals trading firm Money Metals Exchange, stated that this "rise then fall" pattern following the outbreak of conflict is quite typical in crisis markets. He explained that in the initial phase of a geopolitical conflict, markets often rush to buy gold as a safe haven due to fears of escalating instability, driving a rapid price increase. However, as the conflict enters a stalemate, liquidity needs become prominent—investors sell gold to raise cash to cover losses in other assets or meet margin calls.
Simultaneously, the market's core narrative shifts from purely geopolitical concerns to fears of inflation and expectations that the Federal Reserve may pause its interest rate cutting cycle. These factors collectively contribute to the subsequent decline in gold prices.
Notably, the price of the global benchmark Brent crude oil front-month contract has surged approximately 49% since the conflict began. The year's intraday high occurred on March 9, reaching $119.50 per barrel, while the May futures contract settled at a high of $108.23 per barrel on Monday.
Michael Armstrong, Co-founder and Managing Partner at futures brokerage Altavest, pointed out that persistently high energy prices are likely to act as a drag on economic growth in the coming months. He further analyzed that rising oil prices are expected to suppress GDP growth in the second quarter, and this pressured economic environment could enhance gold's appeal as a safe-haven asset for investors.
Armstrong also emphasized that the United States continues to carry trillions of dollars in fiscal deficits, a gap that will likely ultimately be filled by increasing the money supply. This fundamentally strengthens gold's value as an inflation hedge and store of value.
Brien Lundin, Editor of the Gold Newsletter, noted that gold has become "lumped in with all other asset markets," and its price movements are significantly influenced by the progression of the U.S.-Iran conflict. Lundin explained that whenever prospects for peace dim, the ensuing surge in oil prices sparks concerns about further monetary tightening by the Fed, leading to declines in most risk assets, including stocks. For example, the S&P 500 index fell 5.1% in March.
During this process, gold fell alongside equities, dragging down silver and mining stocks with it. The S&P 500 Metals and Mining industry index fell about 13% in March. This systemic decline across asset classes confirms the "liquidity demand" effect mentioned by Gleason.
In recent years, sustained gold purchases by global central banks were a key force driving gold prices to repeated record highs. The World Gold Council described central bank buying in 2025 as "resilient," but notably, the total purchase volume that year was below the more than 1,000 tons annually bought by central banks globally in the preceding three years.
Latest data show that central banks of some countries, including Turkey and Russia, even sold gold in February. Lundin commented that official sector demand has shifted from being a primary driver of market upside to a supporting factor providing a price floor. Overall, central banks are still buying gold, but naturally purchase less when prices reach such staggering levels.
Looking ahead, Lundin believes that gold and silver are currently "like racehorses in the starting gate, poised to run." He judges that once a peace agreement is reached between the U.S. and Iran, a bull market for gold could restart. The underlying logic is that a peace deal would cause oil prices to retreat from highs and effectively ease market concerns about inflation and rising interest rates, creating a more favorable macroeconomic environment for gold.
Gold prices fell on Monday as diplomatic progress toward ending the U.S.-Israel conflict with Iran stalled, keeping oil prices elevated and inflation worries alive. Markets are also closely watching a series of major central bank meetings this week to gauge the actual impact of the war on the global economy.
Bart Melek, Global Head of Commodity Strategy at TD Securities, stated that markets remain skeptical about the possibility of a robust agreement being reached in the short term that would reopen the Strait of Hormuz, which poses near-term pressure on gold and silver. The Strait of Hormuz typically handles about 20% of global seaborne oil and gas shipments. Its continued closure is a direct reason for sustained high oil prices.
Additionally, Fed officials are meeting in Washington this week, potentially Chair Powell's last meeting as Fed Chair. Their policy statement will provide important guidance for gold's short-term direction.
In summary, although gold prices have declined significantly since the Iran conflict began and face near-term pressure from high oil prices, inflation concerns, and Fed policy uncertainty, from a medium-term perspective, expectations of economic pressure, the drag on growth from oil prices, the long-term trend of U.S. fiscal deficit monetization, and the potential for a bull run if geopolitical tensions ease all suggest that the current price correction may be a consolidation phase setting the stage for the next rally. While mindful of short-term risks, investors should maintain cautious optimism regarding the re-emerging reasons to buy gold.
As of 09:11 Beijing Time, spot gold was quoted at $4,689.52 per ounce.
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