ZFX Shanhai Securities: Gold Price Breaks Below $5000

On March 17, Monday, international gold prices declined, officially breaking below the key level of $5,000 per ounce. ZFX ShanHai Securities stated that the core reason for the current weak gold prices is the ongoing escalation of the Iran conflict, which has kept gold demand subdued. Coupled with a strong dollar and high interest rate expectations, these factors have jointly suppressed gold prices. ZFX ShanHai Securities noted that as a traditional safe-haven asset, gold has not played the expected role during this Middle East conflict; instead, it has continued to weaken, becoming a market focus.

The ongoing escalation of the Iran conflict is a significant factor dragging down gold prices. According to ZFX ShanHai Securities, last weekend, the U.S. and Israel jointly attacked Iran’s key export terminals, prompting strong retaliation from Tehran. Currently, there are no signs of de-escalation, further increasing market uncertainty. Meanwhile, the Strait of Hormuz has been effectively blocked, disrupting about one-fifth of global oil and natural gas supplies, pushing oil prices above $100 per barrel. The surge in oil prices has triggered inflation concerns, leading investors to worry that major central banks worldwide will maintain high interest rates or even raise them in some regions. This change in interest rate expectations directly diminishes gold’s appeal—since precious metals are negatively correlated with interest rates, higher rates increase the holding costs of gold, significantly offsetting safe-haven demand. This is a core reason for gold’s poor performance since the conflict erupted. Additionally, analysts at ANZ Bank mentioned in a report that a strong dollar, rising yields, and uncertainty over Federal Reserve policies further diminish gold’s safe-haven value. Moreover, margin calls and liquidations by traders to meet margin requirements have also worsened gold’s weakness.

Looking at the overall performance of precious metals, since the Iran conflict began, various commodities within the sector have shown divergent trends and generally remained under pressure. According to Deutsche Bank, among a basket of 30 major assets, silver performed the worst, while gold ranked 16th. Since the conflict, gold has fallen about 5%, and silver has dropped 14%, contrasting sharply with the traditionally strong safe-haven performance of precious metals. ZFX ShanHai Securities explained that the core reason for this abnormal trend is that inflation concerns triggered by the geopolitical conflict have far exceeded safe-haven demand. Market expectations of central bank policies have driven the direction of the precious metals market, with investors focusing more on the impact of interest rate changes rather than pure safe-haven needs.

This week, the focus of global financial markets is on the Federal Reserve’s two-day monetary policy meeting, which concludes on Wednesday. The market widely expects the Fed to keep interest rates unchanged. This expectation is mainly due to rising economic uncertainties in the U.S., especially the increase in energy prices caused by the Iran conflict, which could further boost inflation and make the Fed more cautious in policy adjustments. Additionally, last week, the Fed’s independence received some support as a U.S. judge dismissed a subpoena against Fed Chair Powell, though the Department of Justice has indicated it will appeal. The case is likely to go to the Supreme Court, and subsequent developments will continue to influence market expectations of Fed policy and, consequently, gold prices.

Despite the current weakness in gold, analysts at ANZ Bank stated that gold’s core value as a safe-haven asset against geopolitical uncertainties remains unchanged. Data shows that since 2026, gold prices have increased by approximately 16%, maintaining a certain annual growth rate and not fully erasing previous gains despite recent weakness. ZFX ShanHai Securities believes that in the short term, gold prices will still be mainly influenced by the Iran conflict’s progression, oil price trends, and Fed policy, likely remaining volatile and weak. The low demand environment is unlikely to improve quickly. For investors, it is important to monitor the Fed’s policy decisions and statements, as well as developments in the Iran conflict and oil prices, to manage investment risks prudently. ZFX ShanHai Securities added that in the long term, if the geopolitical situation further escalates or if central banks shift to easing policies and interest rate expectations decline, safe-haven demand for gold could be reactivated, potentially leading to a rebound in gold prices. Its long-term safe-haven value remains worth attention.