Since the outbreak of the Iran-Iraq War in late February, international gold prices have fallen by nearly 11%. However, for investors closely monitoring the precious metals market, the price correction is not the only focus—the continued rise in oil prices is also accumulating new momentum for gold's future performance. This article will synthesize recent market dynamics and the views of several industry experts to analyze the underlying logic of gold price fluctuations and explain why reasons for buying gold are re-emerging.

I. A Review of Gold Price Trends Since the Outbreak of the War

Since the outbreak of the war with Iran in late February, the gold market has experienced a significant surge followed by a decline. 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% on the day. Compared to the settlement price of $5,247.90 per ounce on February 27, the last trading day before the outbreak of the war, the current gold price has fallen by approximately 10.6%.

Although gold prices initially rose on the first trading day after the conflict erupted, driven by geopolitical risk aversion, the overall trend for March ultimately recorded a decline of nearly 11%. According to Dow Jones Market Data, this was the first monthly decline since June of last year, and also the largest monthly drop in nearly 13 years. Based on the intraday high of the most actively traded contract, gold prices have now retreated by more than 12% from their all-time high of $5,626.80 per ounce reached on January 29.

II. The underlying logic behind the initial surge and subsequent decline in gold prices during the war

Regarding the "rise then fall" pattern of gold prices after the outbreak of war, Stefan Gleeson, president and CEO of precious metals trading firm Money Metals Exchange, said that this is actually a fairly typical price movement trajectory in a crisis market.

He explained that in the early stages of a geopolitical conflict, markets often rush to buy gold as a safe haven due to concerns about the situation spiraling out of control, driving gold prices up rapidly. However, as the conflict enters a stalemate, market participants' liquidity needs become apparent—that is, investors need to sell gold to raise cash to cover losses or margin calls on other assets.

At the same time, the market's core narrative will gradually shift from simple geopolitical concerns to fears of inflation and expectations that the Federal Reserve may pause its rate-cutting cycle. These factors together led to the subsequent decline in gold prices.

III. How High Oil Prices Will Reshape the Macroeconomic Landscape

Of particular note is that the price of the near-month contract for global benchmark Brent crude oil has surged by approximately 49% since the outbreak of the war. The intraday high for the year was reached on March 9th at $119.50 per barrel, and the May futures contract settled at a high of $108.23 per barrel on Monday.

Michael Armstrong, co-founder and managing partner of futures brokerage firm Altavest, pointed out that persistently high energy prices are likely to become a major 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 of this year, and this macroeconomic environment under pressure will actually increase the attractiveness of gold as a safe-haven asset to investors.

In addition, Armstrong emphasized that the United States still has a fiscal deficit of trillions of dollars, and this gap can most likely only be made up by increasing the money supply, which fundamentally enhances the value of gold as a store of value and a hedge against inflation.

IV. The Linkage Effect Between Gold and Other Asset Markets

Brian Lundin, editor of the Gold News Brief, points out that gold is currently "mixed with all other asset markets," and its price movements are therefore significantly influenced by the progress of the US-Iran conflict.

Lundin explained in detail that whenever the prospects for peace dim, the ensuing surge in oil prices triggers market concerns about further tightening of monetary policy by the Federal Reserve, leading to a sharp decline in most risk assets, including stocks. For example, the S&P 500 fell 5.1% in March.

Gold prices fell in tandem with the stock market during this period, dragging down the performance of silver and mining stocks. The S&P 500 Metals & Mining sector index fell by approximately 13% in March. This systemic decline across asset classes precisely confirms the "liquidity demand" effect mentioned by Gleason.

V. The Changing Role of Central Banks in Gold Purchasing and Market Outlook

In recent years, continuous gold purchases by central banks around the world have been a key force driving gold prices to new highs. The World Gold Council describes central bank gold purchases in 2025 as "resilient," but it is worth noting that the total purchase volume that year will be lower than the more than 1,000 tons purchased annually by central banks around the world in the previous three years.

Latest data shows that central banks in some countries, including Turkey and Russia, even sold off gold in February. Lundin commented that official gold purchases have shifted from being the primary driver of market gains to a secondary force providing bottom support.

Overall, central banks are still buying gold, but naturally, purchases will decrease when gold prices rise to such staggering levels.

Looking ahead, Lundin believes that gold and silver are currently "like horses in a race, poised to start." He predicts that once a peace agreement is reached between the US and Iran, the gold bull market could restart. The underlying logic is that a peace agreement would cause oil prices to fall from their highs, while also effectively alleviating market concerns about inflation and further interest rate increases, thus creating a more favorable macroeconomic environment for gold.

VI. Recent Market Focus and Short-Term Resistance

Gold prices fell on Monday amid stalled diplomatic progress toward ending the US-Israel war in Iraq, which kept oil prices high and inflation concerns persisted. 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 commodities strategy at TD Securities, said the market remains skeptical about whether a strong agreement can be reached in the short term to reopen the Strait of Hormuz, which is putting short-term pressure on gold and silver.

It is worth noting that the Strait of Hormuz typically carries about 20% of global maritime oil and gas transport. The continued closure of this waterway is a direct cause of persistently high oil prices.

In addition, Federal Reserve officials will meet in Washington this week, which may be Powell's last meeting as Fed chairman, and his policy statement will have an important guiding role in the short-term trend of gold.

In conclusion, although gold prices have fallen significantly since the outbreak of the Iran-Iraq War and continue to face multiple pressures in the short term, including high oil prices, inflationary pressures, and uncertainty surrounding Federal Reserve policies, from a medium-term perspective, the anticipated economic downturn, the drag on growth from oil prices, the long-term trend of monetizing the US fiscal deficit, and the potential bull market that could begin once geopolitical tensions ease, all suggest that the current price correction is more of a consolidation phase preparing for the next upward move. While paying attention to short-term risks, investors should also maintain a cautiously optimistic outlook regarding the renewed buying opportunities in gold.

Frequently Asked Questions

Question 1: Why did the price of gold fall instead of rise after the outbreak of the war with Iran?

Gold prices did rise initially due to safe-haven demand, but subsequently, a "liquidity demand" emerged in the market—investors needed to sell gold to raise cash to cover losses in other assets (such as stocks) or to cover margin calls. Simultaneously, market focus shifted to inflation concerns stemming from soaring oil prices and expectations that the Federal Reserve might halt interest rate cuts; these factors combined to depress gold prices.

Question 2: What is the relationship between rising oil prices and gold prices?

Rising oil prices can push up inflation expectations and simultaneously dampen economic growth. When the economy is under pressure due to high oil prices, gold, as a traditional safe-haven asset and inflation hedge, becomes more attractive. However, in the short term, rising oil prices can also trigger market concerns about central bank interest rate hikes, thus putting downward pressure on gold prices, but this downward pressure will gradually weaken as expectations of an economic slowdown strengthen.

Question 3: Why is it said that "reasons for buying are re-emerging" after the gold price drop?

There are three main reasons: First, high oil prices are expected to drag down second-quarter GDP growth, putting pressure on the economy and boosting demand for gold as a safe haven. Second, the US faces a fiscal deficit of trillions of dollars, which will ultimately need to be addressed through printing money, thus enhancing gold's value-preserving properties. Third, many experts believe that once a peace agreement is reached between the US and Iran, leading to a drop in oil prices, the gold bull market is likely to restart.

Question 4: What impact will this week's Federal Reserve meeting have on gold prices?

The Federal Reserve's policy statement will directly impact market expectations regarding the interest rate path. With inflation now at twice the target, it will be very difficult for the Fed to cut rates in the coming months, which is a short-term negative for gold. However, if the Fed signals concerns about an economic slowdown, it could provide policy support for a subsequent rise in gold prices. The market is closely watching Powell's possible final meeting.

Question 5: How do changes in global central bank gold purchasing behavior affect the gold market?

Over the past three years, global central banks have purchased more than 1,000 tons of gold annually, a core driver of rising gold prices. However, purchases declined in 2025, with central banks in Turkey and Russia even selling off gold in February. The role of central banks has shifted from "market driver" to "market supporter"—they are still buying, but their willingness to buy weakens when prices are too high. This change means that gold prices are unlikely to see a repeat of the rapid, one-sided upward trend previously driven by central banks in the short term.

At 09:11 Beijing time, spot gold was trading at $4689.52 per ounce.