Gold market update - March 2026

The recent price correction

After a record-breaking 65% return in 2025, the price of gold fell nearly 11% during a single week in late March 2026. This decline surpasses any weekly loss seen during the 2008 financial crisis, the dotcom crash, and the Covid-19 pandemic. The last comparable weekly drop occurred in 1983, following an aggressive US Federal Reserve tightening cycle aimed at curbing inflation.

Drivers behind the sell-off

We observe three cyclical headwinds. First, the US dollar gained due to its perceived economic resilience in the face of a Middle East energy price shock. While high energy prices will have a clear impact for consumers across the globe, they will not adversely impact the US trade balance because the US is a net energy exporter. This dynamic, combined with short positioning in the USD, enabled the USD to outperform all its G10 peers since the onset of the Iran war.

Second, a repricing of monetary policy expectations plays a key role. Oil prices have spiked due to the Iran war, leading to inflationary concerns. In response, many central bankers have adopted a more hawkish tone.

The third factor is liquidity-driven selling pressure. The recent sell-off has been exacerbated by forced liquidation of crowded long positions. This is evident in de-dollarisation trades expressed through emerging markets, international equity exposure, and precious metals. Cross-asset deleveraging, volatility and liquidity stress have also added to the selling pressure. Furthermore, there is anticipation that Middle East central banks and wealth funds may need to raise liquidity and sell their gold holdings, which typically represent a relatively higher share of their strategic asset allocation.

The long-term case remains strong

Despite recent turbulence, the long-term case for gold remains intact. Policy and geopolitical uncertainty have not diminished; if anything, they have increased. De-dollarisation remains a strategic objective for investors and central banks, which continue to seek USD alternatives amid concerns about US leadership and fiscal unsustainability.

In summary, gold continues to serve as a reliable store of value, especially during periods of uncertainty. The recent decline in prices reflects changing market dynamics, but gold’s long-term relevance is still influenced by global events and economic trends. If geopolitical tensions ease, oil prices and interest rate expectations may shift. On the other hand, if economic conditions deteriorate, central banks could respond with policy adjustments to support stability.