ISTANBUL

Gold began 2026 with strong momentum, but the precious metal plummeted 11.3% in March due to complex dynamics triggered by tensions in the Middle East, marking its sharpest monthly decline since the 2008 global financial crisis.

With the first month of the Middle East conflict already ended, energy price hikes driven by geopolitical risks continue to fuel inflationary pressures, heightening concerns about the Fed's potential hawkish decisions.

Strengthening the US dollar, rising bond yields, and liquidity needs sent gold to its steepest monthly drop last month.

Escalating tensions in the Middle East continue to stoke global inflation risks and liquidity needs, with gold falling to $4,099.52 per ounce, its lowest since Nov. 2025.

Rising bond yields due to higher oil prices, potentially intensifying inflationary pressures, expectations that the Fed will stop cutting rates this year, and increasing demand for the US dollar as a safe haven contributed to gold’s decline.

Financial markets still widely expect the Fed to maintain its rates this year, but the probability of rate cuts has largely been phased out despite some officials sending dovish signals.

Central banks’ selling of gold also contributed to the decline in the price of gold per ounce.

Gold began the year with a bang, rising 12.42% in January, its best monthly performance since November 2009, and 8.9% in February, giving it a seven-month streak for the first time in 53 years.

Silver hit a record high of $121.7 per ounce, up 17.2% in January and 12.6% in February, but it fell 19.9% in March to $75.1.

Ole Hansen, head of commodity strategy at Saxo Capital, said gold suffered due to a combination of strong macroeconomic forces at play, temporarily weakening its traditional safe-haven feature, as investors flocked to greenbacks.

Hansen stated that the decline was led by a significant repricing of rate expectations, rising energy prices stoking inflation fears, and rising bond yields in the US.

Rising bond yields make it so that the opportunity cost of holding nonyielding assets like gold increases, prompting investors to sell their holdings and flock to whichever option is safer.

Hansen said the US dollar’s strengthening due to global growth concerns and its safe-haven demand propelled the currency during these times, making gold more expensive for investors trading in currencies other than greenbacks.

He noted that the current situation is more of a supply-driven inflation issue than a demand-crushing crisis and that, unlike in systemic crises, where gold gains value as a hedge against financial instability, the current crisis has resulted in widespread deleveraging.

He added that gold typically behaves more like a source of liquidity in such turbulent times instead of a safe-haven asset, so investors reduce their positions to offset losses in other areas.

*Writing by Emir Yildirim