Gold Slumps 6% as Rising Interest Rates Weigh on Market

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Gold Slumps 6% as Rising Interest Rates Weigh on Market

Gold prices extended their sharp decline on Monday, falling 6% after a steep 10% drop last week, as global macroeconomic shifts continue to pressure the precious metal. The latest downturn places March among the weakest months on record for gold, with prices plunging nearly 21% since the start of the month.

Traditionally regarded as a safe-haven asset during periods of geopolitical instability, gold is currently facing mounting headwinds from rising inflation expectations and a shifting interest rate outlook. Escalating tensions in the Middle East have driven oil prices higher, intensifying inflation concerns and prompting investors to reassess global monetary policy trajectories.

Market sentiment has shifted significantly, with expectations of interest rate cuts in the United States fading. Instead, investors are increasingly bracing for the possibility of faster rate hikes in the UK and Europe. This evolving outlook has reduced the appeal of non-yielding assets such as gold, making them less attractive compared to interest-bearing investments.

Adding to the pressure, yields on US government bonds have surged. The benchmark 10-year Treasury yield has climbed by nearly 0.5 percentage points since the beginning of the month, reaching 4.421%—its highest level since mid-2025. Rising yields have strengthened major currencies and weighed on equities, further diminishing gold’s relative attractiveness.

The market is also witnessing a wave of profit-taking following gold’s strong rally in the previous year, when prices surged by approximately 66%. This has triggered a broader liquidation phase, marked by exchange-traded fund (ETF) outflows, forced selling, and investors closing positions to offset losses in other asset classes.

Despite the current volatility, analysts note that long-term support for gold remains intact. Continued purchases by central banks are helping to underpin the metal’s broader bullish outlook.

Jakub Rochlitz, Market Analyst at eToro, said gold is currently caught between competing forces. While geopolitical tensions typically support safe-haven demand, the inflationary impact of rising energy prices is driving expectations of higher interest rates, weighing heavily on the metal. He added that the current market behavior reflects a classic liquidation phase, with investors taking profits and repositioning portfolios amid changing macroeconomic conditions.

Looking ahead, market participants expect volatility to remain elevated in the near term as global markets adjust. The longer-term trajectory for gold will depend on developments in geopolitical tensions, inflation trends, and central bank policy responses.