Gold isn't your safe haven in this war: It just logged its biggest weekly drop in over 14 years

By Myra P. Saefong

Margin calls, jump in 'value-at-risk' and a shift in U.S. interest-rate expectations are pulling precious-metals prices lower

Gold futures fell 9.5% for the week ended March 20.

Gold prices posted their largest weekly percentage drop in more than 14 years Friday, underscoring how shocks from the Iran conflict are unleasing havoc in markets, even for traditional safe-haven assets.

The Iran war adds a lot of uncertainty, which would in theory boost demand for gold, said Aakash Doshi, global head of gold and metals strategy at State Street Investment Management. But instead, the precious metal has been overwhelmed by broader economic forces, he noted.

A big factor has been the conflict's role in potentially ending the Federal Reserve's interest-rate-cutting cycle - and maybe even ushering in rate hikes. There has also been a rebound in the U.S. dollar DXY, Doshi told MarketWatch, as well as profit-taking and some use of the metal as a "liquidity sleeve to raise cash."

On Comex, the most active, April contract for gold (GCJ26) (GC00) fell $30.80, or 0.7%, to settle at $4,574.90 an ounce Friday. It logged a weekly loss of 9.5%, which was the largest one-week percentage decline for a most active contract since Sept. 23, 2011, according to Dow Jones Market Data. For the month, the precious metal has lost 12.8%.

Sister metal silver - which is typically more volatile because it's more thinly traded than gold - has lost over 14% for the week, with its May contract (SIK26) (SI00) ending at $69.66 an ounce Friday, down $1.55, or 2.2%.

"Gold and silver are caught in a wider market panic, selling off as traders rush to cut losses and risk," said Adrian Ash, director of research at BullionVault, in an analysis report posted Friday.

He cited three reasons why gold has fallen this month: margin calls; a rise in value-at-risk, a tool to measure potential financial losses; and change in market expectations for U.S. interest rates.

"In periods of such sudden market stress, traders will liquidate winning positions to cover their losing bets on other assets," said Ash. "Precious metals offer big gains to tap after making their strongest annual rise since 1979."

Value-at-risk, meanwhile has jumped for all portfolio and trading books amid a an explosion of volatility in the financial markets, he noted. So trading positions have "needed to be scaled back or shut, regardless of asset."

And because gold pays no income, it is "intuitive" that bullion prices should struggle when interest rates rise, Ash said.

"Market expectations have completely reversed thanks to the energy price shock, creating a stiff headwind for nonyielding assets," he said.

Traders now see the chances of a Fed rate hike this year at over 50%.

Read: Stocks, bonds struggle as traders now see chances of Fed rate hike at over 50% - up sharply from earlier this week

-Myra P. Saefong

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03-20-26 1532ET