Why did gold fall after the Iran war? JPMorgan: In the early stages of market turmoil, gold is often sold off first, but may quickly rebound afterward.
Since the outbreak of the Iran conflict two weeks ago, the price of gold has not risen but has fallen, dropping about 6% compared to pre-war levels, which has suddenly escalated market doubts about its safe-haven properties.
According to Wind Trading Desk, JPMorgan offered a systematic interpretation in its commodity research report released on March 13: Gold tends to be “sold off together” in the early stage of a surge in market stress, which is a well-documented historical pattern, not a signal that its safe-haven function has failed. Historical data show that this initial pullback often creates tactical buying opportunities, and gold prices usually rebound quickly and regain lost ground within the next few trading days.
JPMorgan points out that this round of gold sell-off is driven by multiple factors: surging energy prices have pushed up inflation expectations, causing markets to sharply reduce their expectations for Federal Reserve rate cuts, combined with a rapid rebound in the dollar, forming the immediate negative backdrop. However, the bank believes the main driving force is the broad risk-off caused by heightened stock market volatility—when the VIX index is elevated and keeps rising, investors, under the pressure of margin calls, portfolio rebalancing, and VaR shocks, are forced to raise liquidity across the board, with gold holdings being the first to be sold off. As a result, global gold ETF holdings saw clear outflows last week.
In the short term, JPMorgan warns that gold could still face further downward pressure, especially if the stock market prices in a more severe deterioration in global economic prospects, triggering a new wave of risk-off, and if the rates market continues to absorb expectations of Fed rate cuts, it could add extra drag. But the bank also stresses that the longer energy disruption lasts and the greater its impact on inflation and economic growth, the more likely gold’s macro backdrop will “quickly and significantly turn bullish,” with the Fed’s shift to easing further amplifying this trend.
From JPMorgan’s latest price forecast, the bank maintains a strong bullish view on gold, predicting an average price of $5,100/oz in Q1 2026, rising to $5,530/oz in Q2, $5,900/oz in Q3, and further to $6,300/oz in Q4.
“Broad Sell-off”: Gold not immune from the market’s risk-off tide
JPMorgan’s analysis shows that gold being sold off in the early stage of market stress is a structural pattern supported by historical data. Weekly data since 2006 reveal that when the VIX index is high (30 or above) and continues to climb, gold's average weekly return turns negative—the only VIX range in which this happens, and the probability of gold price rising during these periods is only 45%.
The logic behind this is that when market stress surges, investors face multiple constraints such as margin calls, portfolio rebalancing, and VaR shocks, forcing them to compress risk exposure across asset classes to boost liquidity. Gold, as a highly liquid asset, is hard to avoid being sold. At the same time, when the VIX is elevated, the dollar often shows asymmetric strength, putting extra pressure on dollar-denominated gold prices.
JPMorgan also points out that the positive boost to gold from geopolitical risk premiums is often very short-lived, more displaying a “buy the rumor, sell the fact” dynamic. This explains why gold failed to maintain its upward momentum after the Iran conflict erupted.
Historical Pattern: Initial sell pressure is brief, rebounds are swift and substantial
Historical data further reveal that risk-off driven gold price declines usually last for a limited time, with subsequent rebounds often rapid and pronounced. JPMorgan reviewed 25 separate events since 2006 where the VIX first closed above 30: sell-off pressure is most concentrated in the first two trading days after the breach, with gold prices dropping an average of about 0.5%; starting from the third trading day, gold prices show sustained and significant rebound on average; by the fourth trading day, gold has on average recouped all losses and exceeded pre-breach levels; by around the tenth trading day, the average gain from trough to peak exceeds 2%.
Notably, of these 25 events, in 22 cases the VIX fell back below 30 within about 10 to 15 trading days. JPMorgan emphasizes that the direction of VIX movement is critical—when the VIX is high but trending down, gold historically performs strongest, which contrasts sharply with its weakest performance when the VIX is high and rising. This highlights the crucial significance of VIX’s trend direction as a short-term tactical signal for gold prices.
The bank also notes tail risks: During the 2008 global financial crisis, as well as the 2011 and 2020 COVID pandemic, the VIX stayed elevated for a prolonged period, causing the gold rebound process to stretch out or even stall, exceptions to this pattern. Investors need to stay vigilant about this.
Longer-term bullish logic: inflation hedge value and Fed policy shift
JPMorgan believes that if the Strait of Hormuz remains blocked for an extended period, gold will ultimately rise sharply, with two mutually reinforcing logical supports for this view.
The first is inflation hedging value. The bank reviewed five historic periods since 2000 when US CPI rose rapidly by more than 2.5 percentage points: aside from the post-pandemic inflation cycle (2020-2022), gold posted double-digit gains in all other periods, and outperformed the Bloomberg Commodity Index (BCOM). The post-pandemic inflation was driven by positive demand shocks and supply chain constraints, causing commodity gains to far outpace gold, which was a special case. JPMorgan believes that if this oil-driven shock turns into a stagflation environment, gold’s inflation hedge value will stand out even more.
The second is expectations of a Fed policy shift. JPMorgan cites its economists’ analysis that currently, moderate oil price rises support the Fed’s maintaining rates steady. But if oil continues surging to $120/barrel or higher, economic downside risks will increase non-linearly and the job market will take a substantial hit. Although headline inflation would be high, transmission to core inflation is relatively limited, so the Fed is expected to turn dovish for its dual mandate on employment. JPMorgan stresses that once the Fed accelerates its rate cut path, this will significantly amplify upside momentum for gold.
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The above highlights are from Wind Trading Desk.
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