During the week of March 16-20, gold plunged 11%, marking its largest weekly decline since 1983 and one of the sharpest drops in modern market history. Prices fell to around $4,488 per ounce, wiping out more than $2 trillion in market value in a matter of days.
Data from CoinCodex confirms that this selloff exceeded the sharp declines seen in late January, when gold dropped rapidly from roughly $5,320 to $4,650. While gold had previously rallied on geopolitical uncertainty, the current environment is producing a very different reaction.
Since February 28, when US-Israeli strikes on Iran began, gold has fallen more than 15%. Before that, the metal was trading near $5,500, supported by its traditional role as a safe-haven asset. That narrative is now being challenged as the same geopolitical tensions that once fueled demand are now contributing to its decline.
The conflict has disrupted supply flows through the Strait of Hormuz, raising concerns about a prolonged energy crisis. Rising oil prices are pushing inflation expectations higher, which in turn strengthens the case for the Federal Reserve to keep interest rates elevated.
Why rising rates are hurting gold
Higher interest rates reduce the appeal of gold because it does not generate yield. As bonds and other income-producing assets become more attractive, capital tends to rotate away from gold.
Federal Reserve Chairman Jerome Powell has indicated that inflation may remain elevated in the short term due to energy market pressures. As a result, markets expect the Fed to keep rates steady for longer, limiting upside potential for gold.
At the same time, geopolitical signals remain mixed. On March 20, President Trump suggested the possibility of scaling back military efforts, yet the US continues to deploy additional troops and carry out airstrikes in the region. This combination of uncertainty and sustained inflation pressure is creating an unusual environment for gold.
Bitcoin diverges as relative strength begins to improve
While gold struggles, Bitcoin is starting to show relative strength. Over the past 12 months, gold remains up 48.5%, while Bitcoin is down 16.5%. However, the short-term trend tells a different story.
Since late February, Bitcoin has gained over 11.6%, trading near $70,535, while gold has declined more than 15% during the same period. This divergence suggests a potential shift in market leadership.
The move highlights a growing narrative: Bitcoin may be regaining traction as an alternative asset, especially as traditional safe havens face pressure from macroeconomic forces.
Gold’s sharp decline reflects a rare structural situation where two opposing forces are acting simultaneously. Geopolitical conflict is driving inflation higher through oil prices, but that same inflation is forcing central banks to maintain high interest rates, undermining gold’s core appeal.
A similar dynamic was last seen during the early 1980s under Paul Volcker, when aggressive rate hikes pushed gold from $850 to $300 per ounce.
For now, markets remain in a transitional phase. Gold is under pressure, Bitcoin is stabilizing, and investors are reassessing what truly qualifies as a safe-haven asset in a changing macro environment.
