Gold’s Surprising Wartime Sell-Off

Your current trading platform is probably letting you down

Liquid is one of the fastest growing trading platforms, allowing users to trade stocks, commodities, FX, and more 24/7/365 from their phone and computer.

Trading on Liquid is as simple as:

The best part is that Liquid markets never close. So no matter what is going on in the world, you are able to keep your portfolio positioned properly.

Start trading 24/7 today

Gold is supposed to rally during times of crisis.

At least, that’s been the operating theory for centuries. That’s a big reason why individuals, institutions, and sovereign wealth funds own it. Gold has a long history of rallying during all kinds of geopolitical crises.

And historically, war  spending is inflationary. Look at what happened to Confederate money during the American Civil War. 

So war spending tends to cut the value of the dollar, all other things being equal. 

But that’s not quite what happened over the course of the last month, since the Iran war kicked off. Instead, we had a long selloff over most of March, with gold only finding its footing and rallying in the last few days.

Here’s what actually happened:

When U.S. and Israeli forces struck Iran on February 28, the spot gold price quickly rose from $5,296 to $5,423 per troy ounce, right on script. 

And then things flipped. 

.A worldwide gold sell-off drove prices down by more than 6 percent, hitting $5,085 by March 3. And it kept falling. It fell another 10 percent during the week of March 20 alone—its biggest weekly loss since 1983—and was down more than 14% since the war began. 

On March 23rd, the metal traded around $4,100, roughly 27% below its all-time high of $5,589.38, set on January 28^th.  For gold investors, it was brutal.

Not as bad as things were for the Iranian Mullahs. But brutal from an investment perspective.

But things are finally starting to turn around. As of this writing on March 25^th, oil markets started to tame, the gold spot price recovered to roughly $4,552 per ounce. Prices climbed as falling oil reduced fears of persistent inflation, following reports that Washington is working on a proposal to end the conflict.

This particular crisis hit gold from three directions at once: oil prices, interest rates, and the dollar.

When Iran effectively closed the Strait of Hormuz, oil surged past $100 a barrel—as predicted. These higher oil prices fueled fears of persistent inflation. Some bears worried a long-term regime change was at hand. When inflation heats up, central banks tend to keep interest rates high, and even lift them higher.

And remember: Gold pays no interest.

Higher yields elsewhere tend to pull conservative money out of gold and other precious metals, and into bonds where investors at least get paid to wait. 

And that's pretty much what happened. 

Before the war, markets had been expecting two Fed rate cuts in 2026. The March Fed meeting held that count at one—a meaningful disappointment for gold investors counting on easier money ahead. Fed Chairman Jerome Powell said inflation expectations had risen, "likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East."

Meanwhile, investors facing losses in their stock portfolios had to sell something profitable to raise cash—and gold, trading at record highs in late winter after its historic 2025 run, was a natural candidate.

The week of March 4^th, investors yanked the price equivalent of some 25 tons of physical gold out of the SPDR Gold Trust over just seven days, representing the largest weekly outflow in ten years.

Meanwhile, the dollar rose, increasing the price of gold for investors all over the world. 

BNP Paribas commodities strategist David Wilson notes that this pattern has appeared before: in 2008, 2020, and 2022, gold fell sharply in the early stages of a crisis as investors sold assets to hold dollars — and in all three cases, a sustained rally followed. MINING.COM

Wall Street tracks anxiety through an index called the VIX. Sometimes called “the fear gauge," the VIX It measures how much investors are paying to buy “insurance” against sudden market swings. The higher the number, the more fear there is in the market.

A VIX level of 20 indicates significant stress. And on March 25^th, the VIX closed at 25.33—well above the normal level.

But that’s just a snapshot. The point-blank VIX level is a coincident indicator. But it doesn’t tell us much about the likely direction of future markets.

So most systemic traders don’t focus on the immediate VIX level. They look at the options prices on future VIX contracts, and they look at the shape of the price curve over time. 

Here’s how it works: 

You can buy VIX protection at different points in the future — next month, three months out, and six months out. 

Right now, those contract prices tell a clear story: Near-term protection is expensive, but contracts covering the summer months are priced meaningfully lower. This pattern — where near-term fear contracts cost more than longer-dated ones — is called backwardation, and it typically signals that investors expect current stress to ease over time.

Furthermore, the VIX option price curve shows the price of protection flattening out in two or three months, returning to a much more normal level.

With the VIX near 25 today, the curve suggests traders expect current volatility to ease over the coming months — a window that points roughly toward summer. 

Meanwhile, oil futures markets are sending much the same message: Energy volatility has already started reverting to the mean, and U.S. inflation expectations have barely moved on this oil spike.

This is a striking contrast to what happened in the U.S. after Russia invaded Ukraine in 2022. Markets appear to be treating this as an acute and temporary oil shock with a foreseeable end… not a permanent regime change. 

If the market's read is right and the Gulf crisis eases by mid-summer, the forces that crushed gold in March likely reverse in sequence:  Oil falls. Inflation fears recede. The Fed's path to rate cuts reopens. The dollar weakens. 

And gold recovers.

Goldman Sachs is maintaining its  year-end price target of $5,400, citing continued central bank buying as countries diversify reserves away from dollar-denominated assets. J.P. Morgan is even more bullish, holding a $6,300 year-end target; And Deutsche Bank is holding its end-of-year target at $6,000. 

Outlook
The war is not over.

While the Trump administration has indicated that there has been productive dialogue and even floated the prospect of a ceasefire, any re-escalation restarts the cycle all over again. 

But if you hold your gold in an IRA or you aren’t carrying margin debt on your portfolio, you can take things in stride. Your gold IRA holdings are insulated from the margin calls that can drive institutional selling.

That’s why IRA investors experienced March very differently compared to leveraged traders. The same dislocation that forced hedge funds to sell is, for a long-term holder with no forced selling pressure, noise on the way to a destination the market is already pricing.

If gold made sense before the crisis, and before the significant March declines, it makes even more sense now. 

—

John E.
Wealth Money Catalyst

NO FINANCIAL ADVICE

Wealth Money Catalyst is a research and publishing entity and does not provide legal, tax, or investment advice. Wealth Money Catalyst is not a registered investment advisor, broker-dealer, or financial planner. The content provided is for informational and educational purposes only. All investment decisions are solely the responsibility of the reader. Past performance is not indicative of future results. Consult with a qualified financial professional before making any investment decisions. We may be compensated by companies we recommend. By using this site, you agree to our terms and policies below.

Wealth Money Catalyst is not a financial advisor. We are a research and publishing company that matches users with the best vetted providers.. We do not manage, hold, or advise on any investment accounts. Any provider match is based on information you provide and is subject to the provider's own qualification process.