Gold slides as investors switch to dollar amid war-driven inflation fears

Global gold prices fell sharply, as a stronger dollar and expectations of higher interest rates undermined demand for the safe-haven asset.

Investors shifted towards holding dollars instead, as the war involving Iran shows signs of dragging on.

Reuters reported that spot gold fell on Tuesday (March 3, 2026), at one point dropping more than 4%, as some investors chose the dollar over gold as a safe haven amid the impact of the air war involving the United States and Israel against Iran.

The decline also came as investors reduced expectations for interest-rate cuts due to inflation concerns.

In the latest update overnight, spot gold fell 3.3% to US$5,150.89 an ounce, after touching its lowest level since February 20.

US gold futures for April delivery fell 2.8% to US$5,161.50.

“The dollar is strengthening significantly, and US Treasury yields are also rising — and that is a major headwind for gold, and especially for silver,” said independent analyst Ross Norman.

Spot silver plunged 9.1% to US$81.31 an ounce, after jumping to its highest level in more than four weeks on Monday.

US dollar hits over one-month high

The US dollar rose 0.9% to its highest level in more than a month, while US Treasury yields surged.

In general, a stronger dollar makes gold — priced in dollars — more expensive for buyers using other currencies, and higher yields increase the opportunity cost of holding metals that do not pay interest.

Nasdaq led declines in US stock index futures, falling 2.3% on Tuesday.

Global oil and gas shipping rates surged, stoking inflation concerns after an official from Iran’s Islamic Revolutionary Guard Corps said on Monday that the Strait of Hormuz was closed to maritime traffic and that the country would fire on any ship attempting to pass.

Although gold is seen as a long-term hedge against inflation, higher inflation can push real yields higher and strengthen the dollar, keeping borrowing costs elevated for longer and reducing demand for the non-yielding metal.

Investors expect the Federal Reserve to keep rates unchanged at its next two-day meeting on March 18, according to CME Group’s FedWatch tool.

The probability of rates being held in June — previously below 45% — has risen to more than 60%.

However, several analysts remain positive on gold prices, including BMI, a unit of Fitch Solutions, which believes gold could reach a record high above US$5,600 an ounce this week unless there are signs of de-escalation in the conflict.

“In an environment where geopolitical risks converge with inflation pressures and the complexity of monetary policy, gold has become a tool for reallocating risk within investment portfolios,” said Rania Gule, an analyst at XS.com.

Platinum plunged 11.7% to US$2,034.20, while palladium fell 5.7% to US$1,665.22.