Gold will become a star asset in 2026 For the past two years. After rallying more than 60% in 2025 and hitting an all-time high of $5,596 per ounce in late January, the metal seemed unstoppable.
A weak dollar, falling interest rates, big central bank purchases and continued geopolitical tensions combined to provide enough fuel to overcome one psychological hurdle after another.
But this Friday, March 20th, the outlook is different. The ounce is trading around $4,509. It has accumulated losses of more than 20% since its peak in January.
Why does this decline occur? The reasons are varied and interrelated, but can be summarized in four points:
1. The Fed has no intention of cutting interest rates anytime soon.
On Wednesday, the Fed kept interest rates in the 3.50-3.75% range and updated its forecast as follows: There will be no interest rate cuts unless the US economy improves.
The group’s president, Jerome Powell, cited “unusual uncertainty” caused by the Iran conflict and its inflationary impact as the main reason.
If high interest rates continue for a long period of time, Government bonds become more attractive compared to assets without fixed returns, such as gold.
2. Inflation calculations have changed due to soaring oil prices
Due to the escalation of the Iranian conflict, Crude oil price exceeds $110 per barrel. As reported by CriptoNoticias, Brent hit $119 per barrel, its highest price since 2022.
The closure of the Strait of Hormuz due to the Iran war is the main reason for this price increase. The sea route is extremely important to industry, as 20% of the world’s oil production passes through it.
This move brings new inflationary pressures (Increases in energy, transportation costs, industrial production, etc.) force the Federal Reserve to maintain a restrictive stance.
Gold benefited from a scenario of lower inflation and lower interest rates in 2025, but now faces the opposite scenario of higher inflation and no room for the Fed to cut rates.
3. Gold loses its role as a haven due to oil shocks
The situation is paradoxical. Wars are active in the Middle East and gold is falling. However, when geopolitical shocks are transmitted through energy commodities, metals tend to behave more like risk assets than havens.
Furthermore, in crisis situations related to oil, governments and sovereign funds in the affected areas; May be forced to sell gold reserves to cover extraordinary expenses Alternatively, it could compensate for the decline in energy revenues and put selling pressure on the market.
There is no evidence yet that this is already happening, but the possibility cannot be ruled out. Perhaps investors have already taken protective measures (switching capital from gold to cash or bonds).
4. Gold was overbought
Since«Chartismo» Technical analysis revealed the following: Gold was at overbought levels. In other words, prices rose too quickly.
This is evidenced, for example, by the Relative Strength Index (RSI). As you can see from the chart below, the monthly RSI has reached levels not seen since 1967.
In retrospect, technical modifications of this magnitude were inevitable. It’s unclear when that will arrive, but it had to happen at some point.
End of bullish cycle for gold?
The answer to this last intertitle question is probably not.
The structural factors that caused stock prices to rise in 2025 remain in place. Emerging market central banks will continue to build up gold reserves as part of their de-dollarization drive, US public debt shows no signs of decreasing, and gold remains a reference asset for those distrustful of the current monetary system.
Today’s correction (which could last weeks or even months) looks more like a violent readjustment than a trend reversal.
That said, unless the Fed returns to production cuts and/or oil gives way, metals are unlikely to recover from January highs in the near term.
and our dear Bitcoin (BTC)share some of the same structural catalysts but do not have the forced flow problem. The search for financial alternatives could then be used.
