Good morning, investors. The developments on the Iran war are almost coming out by the hour. That’s what happens when policy moves at the speed of a Truth Social feed.

One of the biggest repercussions of this to start the week has been gold’s volatile and unusual trading pattern. That’s what we’re unpacking today.

Gold bears

The Middle East conflict is nearing the one-month mark yet gold prices are turning lower.

Spot gold started the week more than 20% below its record high of $5,400 from January, with President Trump announcing a five-day pause on military strikes amid productive talks with Tehran.

The war itself, played a role in catalyzing the sudden bear market.

The logic seems backward but once you trace the series of events, it starts to make sense:

So it’s not exactly right to say gold is falling because geopolitical risks are subsiding.

Instead, it’s more accurate to point to oil-driven inflation concerns as the variable that’s dampening forecasts for the central bank to loosen policy.

If markets continue to believe that the Fed won’t budge this year on account of resurgent inflation, that could put a ceiling on gold prices in the near term.

To be sure, gold is coming off its best stretch in decades, securing a 64% return in 2025 and 27% in 2024.

Momentum like that is enough to convince casual and young investors to pile in — many of my Gen Z friends bought gold for the first time ever in recent months — despite the asset’s relatively boring and old-fashioned attributes.

For what it’s worth, Wells Fargo, JPMorgan and Bank of America all maintain year-end price targets above $6,000, representing about 40% upside from current levels.

A lasting ceasefire or peace deal that cools oil prices would quickly change the outlook for gold. Early reports of a resolution on Monday helped oil prices shed 10% in a matter of hours.

For now, the precious metal is hamstrung by the same type of crisis that usually pushes it higher.

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🛢 Oil dropped nearly 11% on optimism in the Middle East. Brent crude fell below $100 per barrel from above $112 on Friday, sending stock prices higher at the same time. (Yahoo Finance)

🎯 The energy crisis is worse than the 1970s and Ukraine war combined. That’s according to the IEA chief, who highlighted that more than 40 energy assets across nine Middle East countries have been severely damaged since the conflict began. (CNBC)

📊 US officials say the Strait of Hormuz has dozens of Iranian mines. That report of underwater bombs came out the same day President Trump announced a potential resolution to the conflict. (CBS)

🗓 March 24, 2020: The Dow surged 2,113 points for an 11.37% gain, the biggest one-day point gain in the index's history at the time.

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