Doha, March 30 (QNA) - Global gold prices are experiencing heightened volatility amid escalating geopolitical tensions linked to the war on Iran, alongside disruptions in global energy markets.

These developments are directly impacting investor behavior and their orientation toward safe-haven assets, foremost among them gold. However, the traditional safe haven is no longer responding at the same pace to shocks, due to shifting market priorities toward liquidity and returns.

Financial experts explained to Qatar News Agency (QNA) that the initial phase of the crisis witnessed a significant decline in gold prices despite rising geopolitical risks—an apparent paradox that reflects a structural shift in how assets are priced. They noted that gold has recently come under intense selling pressure, recording sharp weekly losses exceeding 11% by some estimates, and even reaching around 16% at the peak of volatility within just a few days—its worst performance in decades. This occurred alongside a strengthening US dollar index and rising yields on US Treasury bonds, which increased the attractiveness of income-generating assets compared to gold, which does not provide periodic returns.

The experts clarified that this decline was not due to a loss of confidence in gold as a strategic asset, but rather the result of severe liquidity pressures that forced financial institutions and hedge funds to liquidate part of their holdings to cover losses or meet margin calls, as gold exchange-traded funds (ETFs) recorded outflows amounting to billions of dollars, further deepening the downturn. However, the experts pointed out that markets showed a noticeable rebound as initial signs of a potential negotiation track between the parties emerged, leading to a recovery in prices of approximately 4%, driven by easing tensions.

In this context, a financial analyst Mubarak Al Tamimi told QNA that gold has not strategically failed in its role as a safe-haven asset; rather, it experienced a short-term tactical setback at the beginning of the crisis. He explained that markets initially favored holding cash liquidity amid expectations of continued interest rate increases driven by the energy shock, which limited immediate demand for gold.

Al Tamimi added that the inflationary nature of the shock played a key role in enhancing the appeal of cash and yield-bearing instruments, as the surge in oil and gas prices fueled inflation expectations, prompting investors to anticipate prolonged monetary tightening, which in turn exerted downward pressure on gold in the short term.

He further noted that the behavior of financial institutions during the crisis suggests that gold has partially become a "liquidity victim," as it was utilized as a quick source of cash, pointing out that gold-backed exchange-traded funds have seen outflows of $7.9 billion during the latest downturn.

On the strategic front, Al Tamimi said that the rise in US federal debt to around $39.01 trillion is reinforcing central banks' shift toward diversifying their reserves, with growing demand for gold as a sovereign asset, noting that estimates indicate that 95% of central banks expect to increase their gold reserves over the next 12 months, while 43% are already planning to expand their holdings.

For his part, Investment Manager at Qatar Securities Company (QSC) Ramzi Qasmieh told QNA that the decline in gold's performance during the crisis is directly linked to the strength of the US dollar and rising bond yields. The US Dollar Index surged to nearly 101 points, its highest level in several months, driven by expectations of persistent inflation and higher interest rates.

Qasmieh added that rising yields on US Treasury bonds made them more attractive to investors compared with gold, due to their ability to generate periodic income. This, he said, increased the opportunity cost of holding gold, particularly in a financial environment characterized by elevated real yields.

He underlined that the markets witnessed intense gold selling over a short period, resulting in the biggest weekly loss since 1983, with declines exceeding 11%, as financial institutions liquidated positions to raise cash and cover losses in other assets.

Qasmieh added that the rise of US federal debt to nearly $40 trillion has prompted many countries, especially in emerging markets, to increase their gold reserves and reduce reliance on the dollar as part of a strategy to diversify assets and hedge against financial and geopolitical risks.

Qatar Chamber Board Member and Chairperson of the Gold and Jewellery Committee Nasser bin Sulaiman Al Haider affirmed in a press statement yesterday that the committee closely monitors the gold market, overseeing compliance by retailers with pricing and the availability of bars and jewelry. He denied any speculation or deliberate refusal by traders to sell.

He explained that the current challenges stem from disruptions in supply chains, noting that gold imports rely heavily on air shipments, which have been affected by the prevailing circumstances. He added that traders are facing circumstances beyond their control, making it unfair to hold them responsible for shortages or accuse them of malpractice. He emphasized that price fluctuations and supply disruptions remain the main pressures on the market at present. (QNA)