Middle East conflicts boost safe-haven demand for the US dollar, putting pressure on gold; experts say traditional correlation between gold prices and the dollar has broken down

Forex Media March 17th News—— Amid the ongoing escalation of the Middle East conflict between the US, Israel, and Iran, surging energy prices, and a revival in inflation expectations, the US dollar is once again strengthening as a safe-haven asset, exerting significant pressure on gold. Robert Minter, Strategy Director of abrdn ETF, points out that since 2022, the traditional correlation between gold and the US dollar has completely broken down. Future price movements will be more driven by global structural forces and continued gold buying by central banks.

With the ongoing escalation of the US-Israel-Iran conflict in the Middle East, soaring energy prices, and resurging inflation expectations, the gold market is once again being put to the test. In the short term, gold prices are struggling to maintain the support level near $5,000 per ounce as the market tries to digest the potential impact of US and Israeli military actions on a global liquidity crisis and inflation threats.

However, Robert Minter, Strategy Director of abrdn ETF,

Short-Term Headwinds: High Interest Rates and Strong Dollar Suppress Gold Prices

Currently, the Federal Reserve's policy stance remains the main obstacle for gold. Inflation remains elevated, and even as economic growth slows, aggressive rate cuts are difficult for the Fed to implement. Prolonged high interest rates support both the dollar exchange rate and bond yields, which traditionally puts significant pressure on the non-yielding asset, gold.



This dynamic directly explains gold’s recent consolidation. Those investors who originally anticipated a turn towards looser monetary policy are now being forced to adjust their expectations. In the short term, high interest rates increase the opportunity cost of holding gold and limit its upside potential.

Strengthened Long-Term Logic: Central Bank Gold Purchases and Sovereign Debt Crisis as Core Support

Robert Minter emphasizes that is the most consistent factor supporting gold’s long-term performance. He said, “Look at how much major currency purchasing power has been diluted, and look at the size of central bank balance sheets, which have grown about 1,000% since 1999—so it’s no surprise gold has performed the way it has.”

He adds that for many investors, this dynamic has become increasingly evident in their daily lives: rising living costs are continuously eroding purchasing power. Financial advisers are increasingly receiving client inquiries on how to protect portfolios from ongoing monetary devaluation. Robert Minter says, “Advisers are hearing clients complain about the erosion of purchasing power in their daily lives. They’re looking for an asset to put in their portfolios to offset this loss, and obviously commodities—especially gold—can play this role.”

He further points out, He believes that, to place meaningful downward pressure on gold, major fiat-currency countries would need to substantially lower sovereign debt. In the current political and economic environment, this scenario is nearly impossible. He adds, "There are currently no solutions being implemented that could reduce sovereign debt in most major fiat currency countries."

Bullish Technical Trend Remains Intact, Short-Term Volatility Aside

a widely used indicator among institutional investors. Robert Minter says, “By any objective measure, you are still in a bull market.”

He believes that geopolitical tensions and continued conflict only strengthen the current trend, Although central bank gold purchases fell slightly to 863 tonnes last year (over 1,000 tonnes per year in the previous three years), the average gold price rose by about 44% compared to the prior year, meaning that governments actually invested significantly more money to maintain their gold-buying pace. He adds: "It's hard to say central bank demand has weakened—they obviously put a lot of money into increasing their gold holdings last year."

with Robert Minter considering this target relatively conservative given rising macro risks facing global markets.

Investor Hesitation Remains, but Further Rallies May Attract New Flows

Despite gold’s strong rally in recent years, many investors remain hesitant to enter the market. Robert Minter says: “It may take another wave of gold rallies to bring those watching from the sidelines into the market.”



Robert Minter’s analysis reminds market participants: gold is no longer simply an anti-dollar instrument, but a strategic asset for countering systemic risk in the global financial system.

Investors should evaluate allocation opportunities from a long-term perspective; short-term pullbacks may present better buying opportunities.


Spot gold daily chart Source: FXHuichong

GMT+8 March 17th, 10:38 am: Spot gold quoted at $5,023.25/oz