Gold Posts Worst Month Since 2013 as Iran War Hits Markets

Gold fell more than 10% in March 2026, its worst monthly decline since June 2013, as the US-Iran war drove inflation fears and dollar strength, reversing the metal's 60%-plus rally in 2025 and triggering forced liquidation of leveraged positions in futures and ETFs. For Mexico, the sell-off carries direct implications for the mining sector, as gold remains a key export, and price volatility affects revenue projections for producers operating in gold-producing states. Goldman Sachs maintains a year-end target of US$5,400/ozt, contingent on Federal Reserve rate cuts and continued central bank diversification.

Gold logged its worst monthly performance since the 2008 global financial crisis in March, falling more than 10% as the US-Iran war triggered a broad repricing of inflation expectations and drove investors toward liquidity over traditional safe-haven assets, even as late-session gains on peace signals trimmed the month's losses.

Spot gold rose 3.5% on March 31 to close at US$4,668.06/oz in New York, while gold futures climbed more than 2% to settle at US$4,678.60, after The Wall Street Journal reported that President Donald Trump told aides he was willing to end military hostilities against Iran even if the Strait of Hormuz remained largely closed. Meanwhile, Iranian state media reported that President Masoud Pezeshkian said the country is also ready to end the war, while reiterating Tehran's demands. 

Trump said on Truth Social that Washington was "in serious discussions" with Iranian officials, but warned that if a deal was not reached soon, US forces would attack electricity plants, oil wells, and Kharg Island. US Secretary of State Marco Rubio said that Washington's objectives in Iran would take "weeks, not months" to achieve. Reuters reported that 2,500 US Marines had arrived in the Middle East over the weekend.

Despite the late-month rebound, gold fell more than 10% in March, snapping an eight-month positive streak and marking its biggest monthly decline since June 2013. From its all-time high of US$5,602 at the end of January, the metal has dropped nearly 25%. 

Silver futures climbed more than 6% on March 31 to US$74.92, with spot silver rising 7.3% to US$75.17/oz, but still ended March down more than 19%, its worst monthly performance since 2011, after reaching an all-time high of US$121 on Jan. 29. Despite March's declines, gold and silver rose more than 7% and 6%, respectively, in the 1Q26.

Why Did Investors Sell a Safe-Haven Asset During a War?

The sell-off defies the traditional behavior of gold during geopolitical crises. The immediate economic fallout from the Iran conflict, surging oil prices, and renewed inflation fears, forced investors to prioritize liquidity and higher-yielding assets over metals, reversing the dynamic that drove gold's record performance in 2025, when the metal rose more than 60% as central banks accumulated reserves and investors sought protection amid economic uncertainty. 

The sharp decline has triggered a swift unwinding of leveraged positions in futures and exchange-traded funds built during last year's rally.

Wayne Nutland, Investment Manager, Shackleton Advisers, told CNBC that the Iran war has returned gold to its more traditional market relationships. "Prior to the Ukraine war, the gold price tended to be inversely correlated to real bond yields and the US dollar," he said. "The period after the Ukraine war upended these relationships, in particular in 2025 and into early 2026 when gold rose very strongly, far in excess of the moves suggested by those historic relationships." He added that bond yields and the dollar have both moved higher in the wake of the Iran conflict. "Gold's declines have perhaps also been exacerbated by the strength of the gold price going into 2026 and possibly a desire amongst investors to liquidate profitable positions," Nutland said.

Iain Barnes, Chief Investment Officer, Netwealth, said price volatility in gold has been running at twice its historical level in recent months due to increased participation from financial investors. "International central banks seeking to diversify their reserves away from US dollars may have started gold's bull market in the past few years, but in the end the market ran out of new financial buyers and instead saw widespread profit-taking as wider uncertainty hit markets and the dollar rebounded," he said.

David Wilson, Director of Commodity Strategy, BNP Paribas, said markets are reacting primarily to headlines with little underlying change in fundamentals. "What this does suggest is, however, that if there is a peace deal in the offing, gold will rally sharply. Conversely, if there is some form of land invasion by US forces, we can expect gold to do the opposite and trend lower," he said.

Goldman Sachs Holds US$5,400 Year-End Target

Despite the sell-off, Goldman Sachs analysts said in note they remain constructive on gold, pointing to markets having repriced the Federal Reserve's monetary policy path to one or no rate cuts this year. "We continue to forecast gold prices reaching US$5,400/ozt by end-2026, as central bank diversification continues, currently low speculative positioning normalizes, and the Fed delivers the 50bp of cuts our economists expect," they said.

The bank noted near-term risks remain skewed to the downside as persistent disruption to the Strait of Hormuz keeps gold vulnerable to further liquidation, but said medium-term risks are skewed to the upside if the Iran episode, together with broader geopolitical developments including Greenland and Venezuela were to accelerate diversification into gold and weigh on perceptions of Western fiscal sustainability.