Precious metals such as gold and silver, which are regarded as representative safe-haven assets, have continued their downward trend since the outbreak of the Iran war. This decline in investment attractiveness is attributed to diminished expectations for a U.S. interest rate cut amid concerns over inflation.

On March 19 (local time), gold futures for April delivery closed at $4,605.7 per ounce on the New York Mercantile Exchange, down 5.93% from the previous session. Silver also dropped by 8.22%, closing at $71.22. The prices of precious metals, including gold and silver, have continued to decline since the Iran war broke out on February 28. Compared to February 27, gold and silver prices have fallen by 12.24% and 23.66%, respectively.

As expectations for interest rate cuts in major countries have faded, investor sentiment has also weakened. Recently, the U.S. Federal Reserve kept its federal funds rate unchanged at 3.5-3.75% per annum after the regular Federal Open Market Committee (FOMC) meeting. This decision came as inflation remains above target despite signs of a slowdown in employment. Notably, the dot plot, which attracted significant market attention, projected the median year-end policy rate at 3.4%, the same as in the December 2025 forecast. This is interpreted to mean that the Fed will cut rates once within the year.

The European Central Bank (ECB) also kept its three key policy rates unchanged. Until last month, the market had expected the ECB to cut rates once this year. However, as the Iran war drags on and energy prices surge, expectations for a rate cut have weakened. In fact, some are even raising the possibility of further rate hikes.

Because gold is an asset that does not yield interest, it becomes more attractive in a low-rate environment. Conversely, when rates rise, investors tend to favor other assets, such as bonds, that offer stable returns. Akash Doshi, Head of Commodities Research at State Street Investment Management, explained, "Before the war, we expected the Fed to cut rates twice. But the market is now reflecting no rate cuts at all this year."

The Wall Street Journal (WSJ) noted that a similar trend occurred in 2022, when Russia’s invasion of Ukraine caused energy prices to soar and fueled inflation. Gold prices fell for seven consecutive months from April to October of that year.

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Another reason cited for the drop in precious metal prices such as gold is the outflow of funds from exchange-traded funds (ETFs). According to Bloomberg News, continuous fund outflows from gold ETFs—which are a representative means of holding gold—have put downward pressure on prices in recent weeks. Demand for gold ETFs tends to react sensitively to changes in interest rates.

It is also analyzed that some investors are realizing profits following recent gains. Gold reached an all-time intraday high of $5,586.2 in January this year. Suki Cooper, Head of Global Commodities Research at Standard Chartered, commented, "Given the substantial increase in gold and silver prices over the past two years, some investors may be taking profits to offset other losses in their portfolios, such as those triggered by margin calls following sharp declines in equities."

Some analysts have noted that weakening demand for metals due to the global economic slowdown is also having an impact. The WSJ reported that platinum, palladium, copper, and aluminum have all been declining this month. This is seen as a signal that investors are recalibrating their expectations for global economic growth. Edward Meir of the commodity trading firm Marex explained, "Investors may believe that a global economic slowdown could lead to some contraction in demand."