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Gold prices have dropped nearly 14% since the West Asia conflict intensified in late February 2026, even as investors usually turn to the metal during geopolitical shocks. The decline has raised a central question: Why is gold falling during a period of rising uncertainty? The move comes after gold gained 13% through February, driven by growing international tensions and demand for stability.
Reuters reported that spot gold fell to $4,097.99 per ounce last Monday, its lowest level since November 24, 2025. The metal has lost more than 14% this month and is on track for its biggest monthly drop since October 2008. At the same time, the US dollar has risen more than 2% since US-Israeli strikes on Iran began on February 28.
Meanwhile, oil prices have moved in the opposite direction. Brent crude has surged 40% in one month as the conflict disrupted supply routes, including the Strait of Hormuz. Over the weekend, Yemeni Houthis launched attacks on Israel, widening the conflict and pushing Brent toward a record monthly rise.
In normal risk-off periods, investors often move into gold for protection. This time, the energy shock has changed this pattern. As oil prices climbed, governments faced higher import costs and stronger pressure on dollar funding.
As a result, countries started selling gold reserves to raise cash quickly. This added more supply to the market and pushed prices lower. The move showed that gold can act as an emergency source of funding during crises, not only as a hedge.
At the same time, investors pulled money from several asset classes. Equities and bonds also declined as global financial conditions tightened. In contrast, commodities facing supply shortages, especially oil, kept rising.
The stronger US dollar has added another layer of pressure on bullion. Since the conflict escalated on February 28, the dollar has gained more than 2%. This has made gold less attractive for buyers using other currencies.
Interest rate expectations have also shifted. Traders have almost fully priced out any chance of a US rate cut this year, according to Fedwatch. Higher rates tend to weaken demand for gold because the metal does not offer yield.
Ricardo Evangelista, an analyst at ActivTrades, said traders expect oil prices to stay elevated for a prolonged period. He said that dynamic could fuel inflation and force central banks to keep rates on hold or even raise them further.
Even so, gold has shown signs of short-term support. Evangelista said traders bought the dip after prices hit multi-month lows last week. This helped lift the metal in the latest sessions, including Friday and today.
Still, the broader pressure has not disappeared. Elevated oil prices, tighter financial conditions, and reserve selling continue to shape the market. For now, gold remains exposed to the same crisis forces that once drove it higher.
Bullion had hit a record high on January 29 and still holds a gain of more than 5% for the quarter. Investors are now waiting for remarks from Federal Reserve Chair Jerome Powell at a Harvard event later in the day, as markets look for clues on rates and inflation.
Gold fell nearly 14% as the West Asia conflict pushed oil prices higher, strengthened the US dollar, and reduced expectations for rate cuts. Reserve selling and tighter financial conditions added pressure. Investors now remain focused on oil, interest rates, and signals from the Federal Reserve.
Also Read: Strait of Hormuz at Risk: CEOs Caution Trump on Oil Market Fallout
