Gold’s March selloff hits the biggest drop in 17 years! Iran conflict boosts oil-price inflation expectations, and Goldman Sachs still says the bottom is by year-end at $5,400

Spot Gold’s performance in March has been bleak. As of March 31, the month’s decline is 14.6%. If it can’t clearly recoup before month-end, it will mark the largest single-month drop since October 2008 (when the month fell 16.8%), nearly 17 years after that worst record during the financial crisis.

During the trading day on March 31, U.S. spot gold was priced at $4,553.69 per ounce, up about 1% on the day. Gold futures (the front-month contract) also rose in tandem by 0.6% to around $4,553, but it still hasn’t been able to reverse the large selloff seen across the entire month.

Why didn’t the war support gold? Inflation expectations are the key

At first glance, war should be a positive for gold—higher safe-haven demand and capital flowing into precious metals. But this time the logic is exactly the opposite.

After a U.S.-led coalition launched military action against Iran in late February, traffic through the Strait of Hormuz plunged by more than 90%, severely disrupting global oil and gas supplies, and Brent crude surged to a peak of $126 per barrel. Soaring energy prices directly boosted inflation expectations, and the market began pricing in that the Federal Reserve would raise rates this year rather than cut them.

Rate-hike expectations strengthened the U.S. dollar and pushed real yields higher—both are gold’s traditional nemeses. Shackleton Advisers investment manager Wayne Nutland explained to CNBC: “In the four years after the war in Ukraine, gold had a period of strength that ran far beyond historical relationships, and by early 2026 the gains were already quite remarkable. After the outbreak of the Iran war, gold instead reverted to the traditional negative correlation with the dollar and bond yields: the dollar and bond yields both strengthened, and gold therefore came under pressure and fell back.”

Netwealth chief investment officer Iain Barnes added that this downturn has similarities to late 2008: “Investors’ positions in commodities were stretched too far. When sentiment toward the dollar reversed, these kinds of positions saw large-scale profit-taking. In addition, because gold’s rally from 2025 into early 2026 was already too large, the magnitude of this selloff has therefore been amplified.”

Trump’s negotiations, troop reinforcements— the situation still full of variables

Another major variable affecting gold’s trend is how the conflict develops. The March 31 rise came in part from diplomatic signals. The Wall Street Journal reported that Trump told his staff that even if the Strait of Hormuz remains broadly closed, he is willing to end military action against Iran. In the same day, U.S. Secretary of State Marco Rubio told Al Jazeera that Washington’s goals in Iran would be achieved “in weeks rather than months.”

However, at the same time, Reuters reported that more than 2,500 U.S. Marines arrived in the Middle East over the weekend. Some sources said these forces came from the elite 82nd Airborne Division, indicating that the military deployment is still being further strengthened.

Goldman Sachs: The drop is deep, but we still look for $5,400 by year-end

Even if gold has pulled back sharply, Goldman Sachs analysts still maintained a bullish stance in a report published on March 30. “Our view on gold remains positive, and we continue to forecast gold reaching $5,400 per ounce by the end of 2026,” they said, citing reasons including: central banks continue to diversify foreign-exchange reserves; currently low speculative positioning will ultimately normalize; and the Federal Reserve, as we expect, will cut rates by 50 basis points this year.

Goldman Sachs also noted that the market has already repriced the Federal Reserve to cut rates only once this year, or possibly not at all, which has created pressure on gold’s near-term price action. However, their core scenario assumes the private sector will not further sell large amounts of gold, and that ongoing disruptions from the Hormuz crisis won’t evolve into a longer-term wave of profit-taking.

This latest deep plunge in gold is a snapshot of the chain reaction triggered by the Iran war: an energy crisis boosts inflation → rate-hike expectations heat up → the U.S. dollar strengthens → the original safe-haven funds instead withdraw from gold. For investors, this offers a sober reminder: in a market environment dominated by inflation shocks, gold’s safe-haven logic may temporarily fail.

This article, “Gold’s March posted the biggest drop in 17 years! The Iran conflict lifts oil prices and inflation expectations; Goldman Sachs still calls for a bottom with $5,400 by year-end,” first appeared on Lian News ABMedia.