World Gold Council Unveiled: Why Is Gold Being Sold Off Amid the US-Iran Conflict?

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Source: JIN10 Data

In March this year, the international gold price suffered a heavy blow, with a monthly drop of 12%, closing at $4,608/ounce, marking the weakest monthly performance since June 2013.

Amid escalating U.S.-Iran tensions and persistently high inflation pressures, why did gold, as a safe-haven asset, plunge against the trend?

The World Gold Council (WGC) pointed out in its latest report that

Under normal market logic, geopolitical turmoil and inflation expectations strongly support gold prices. However, March’s market performance was remarkably counter-intuitive. According to WGC analysis, gold was sold off because traders, facing a wave of cross-asset selling,

"Investors are selling what they ‘can sell’, not what they ‘want to sell’,” the report stated. In the first three weeks of March, despite heightened risk aversion, large-scale deleveraging and liquidity demand broke the supply-demand balance.

From a capital flow perspective, approximately $12 billion (about 84 tons) left global gold ETFs in March. However,

:

Europe and North America:

The outflow was most intense, with North America alone seeing $14 billion leave;

Asia:

Contrarily, Asia saw a net inflow of $1.9 billion (about 10 tons). WGC noted that Asian investors had strong “buying the dip” intentions. Although Asian inflows did not offset the selling in Europe and North America in tonnage, it sent a positive signal.

Additionally, technical factors amplified the decline. When gold prices fell below the key 50/55-day moving averages in mid-March, many commodity trading advisors (CTAs) who rely on algorithmic trading began to liquidate positions massively, further intensifying the downward pressure.

Previously, the market speculated that Middle Eastern sovereign funds selling reserves or regional turmoil influenced gold prices. But WGC refuted this. Although the Central Bank of Turkey used around 50 tons of gold as collateral in swap transactions,

Although tourism and jewelry demand in the Middle East was disrupted by war and trading volume in Dubai increased, this only caused localized discounts, insufficient to determine international pricing; there is no evidence that oil-producing countries are using gold reserves to hedge against local currency depreciation.

Although short-term risks remain, WGC remains optimistic about gold’s medium- and long-term outlook. As gold prices stabilize above key technical levels, wealth management institutions and physical demand have begun to return to the market. In addition, if inflation pressures driven by energy prices lead to weakening economic demand, the Federal Reserve will ultimately have to take a dovish stance, which is a long-term positive for gold.

However, WGC issued a warning: if crude oil prices remain above $100/barrel for an extended period due to ongoing conflicts, a new round of cross-asset deleveraging and soaring yields could occur.

Editor: Zhu Henan