Middle East Conflict Boosts Inflation Expectations, Gold Nears "Ten Straight Days of Decline": Liquidity Squeeze Drives Short-Term Trend

March 24 — Amid escalating Middle East tensions, a surge in energy prices has sparked a chain reaction pressuring the precious metals market. Spot gold fell nearly 2% intraday, though it briefly rebounded above $4,400 during European trading, remaining range-bound on the weak side. A further drop Wednesday would mark its 10th straight trading day decline. Market analysts note the gold pullback isn’t a breakdown of traditional logic, but a classic case of a “liquidity squeeze.” As rising oil prices lift inflation expectations, investors are forced to offload high-liquidity assets—including gold—to cover losses in stocks, bonds and other holdings or meet margin calls. This “sell quality assets to plug gaps” behavior is common in extreme volatility. Earlier, former President Trump announced a delay in strikes on Iran’s power grid, offering temporary support to gold prices. But Iran’s subsequent tough stance, plus reports that U.S. allies could be drawn into the conflict, have deepened market uncertainty. Meanwhile, shipping disruptions in the Strait of Hormuz have amplified energy supply risks. Mainstream institutional views broadly see gold remaining under pressure in the short term. Standard Chartered notes a 4-6 week adjustment period for gold is not uncommon after intense market volatility. Swiss Raiffeisen Bank analysis says gold is often treated as an “ATM” during major crises—liquidated quickly to meet liquidity needs. Historically, gold has seen similar phase-based pullbacks after spikes in risk aversion—whether during the 2008 financial crisis or the early stages of the 2022 Russia-Ukraine conflict. Despite short-term price pressure, analysts broadly agree the long-term fundamentals supporting gold haven’t fundamentally changed: geopolitical risks, global inflation pressures and ongoing central bank gold purchases worldwide.