Since the outbreak of the conflict in Iran two weeks ago, gold prices have fallen by about 6% compared to before the war, raising doubts in the market about its safe-haven properties.
According to news from the Wind Trading Desk, JP Morgan provided a systematic interpretation in a commodity research report released on March 13: the &#34;massive sell-off&#34; of gold at the initial surge of market pressure is a historically documented pattern, rather than a signal of the failure of its safe-haven function; historical data indicates that this initial pullback often constitutes a tactical buying opportunity, with gold prices typically rebounding rapidly in the following trading days to recover lost ground.
JP Morgan pointed out that the current round of gold selling is driven by multiple overlapping factors: soaring energy prices have raised inflation expectations, prompting the market to significantly lower expectations for Federal Reserve interest rate cuts, combined with a rapid rebound in the dollar, creating a direct bearish backdrop. However, the bank believes the main driver is the widespread de-risking triggered by increased stock market volatility—when the VIX index is high and continues to rise, investors are forced to comprehensively raise liquidity under the combined pressure of margin calls, portfolio rebalancing, and VaR shocks, with gold holdings being the first to be sold off, leading to a significant outflow from global gold ETFs last week.
In the short term, JP Morgan warns that gold may still face further downward pressure, especially if the stock market prices in a more severe deterioration of the global economic outlook, which could trigger a new wave of de-risking, and the interest rate market continuing to digest expectations for Federal Reserve rate cuts may also bring additional drag. However, the bank also emphasizes that the longer the energy disruptions last and the more substantial the impact on inflation and economic growth, the more likely the macro backdrop for gold will &#34;quickly and significantly turn bullish,&#34; with the Federal Reserve's shift to easing further amplifying this trend.
According to JP Morgan's latest price forecast, the bank maintains a strong bullish outlook for gold, expecting an average price of $5,100 per ounce in Q1 2026, rising to $5,530 per ounce in Q2, reaching $5,900 per ounce in Q3, and further climbing to $6,300 per ounce in Q4.
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<h2>&#34;Comprehensive Sell-off&#34;: Gold is not immune to the wave of market de-risking</h2>
JP Morgan's analysis shows that the sell-off of gold at the initial stage of market pressure is a structural pattern supported by historical data. Weekly data since 2006 indicates that when the VIX index is high (30 and above) and continues to rise, the average weekly return of gold turns negative—this is the only state among all VIX ranges that exhibits this characteristic, with the probability of gold prices rising during the same period being only 45%.
The logic behind this pattern is that when market pressure surges, investors face multiple constraints from margin calls, portfolio rebalancing, and VaR shocks, forcing them to comprehensively compress risk exposure across asset classes to enhance liquidity, with gold, as a highly liquid asset, being no exception. Meanwhile, when the VIX is high, the dollar often shows asymmetric strength, which also exerts additional pressure on gold prices denominated in dollars
JP Morgan also pointed out that the geopolitical conflict risk premium's boosting effect on gold is often very short-lived, more often reflecting a &#34;buy the expectation, sell the fact&#34; dynamic. This explains why gold prices failed to maintain upward momentum after the outbreak of the Iran conflict.
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<h2>Historical Pattern: Initial Selling Pressure is Brief, Rebound is Rapid and Significant</h2>
Historical data further reveals that the downward movement in gold prices triggered by risk aversion usually lasts for a limited time, with subsequent rebounds often being swift and pronounced. JP Morgan analyzed 25 independent events since 2006 where the VIX first closed above 30 and found that selling pressure was most concentrated in the first two trading days after the breakout, with gold prices averaging a cumulative decline of about 0.5%; however, from the third trading day onward, gold prices typically showed a sustained and significant rebound; by the fourth trading day, gold prices had on average recovered all losses and surpassed pre-breakout levels; by around the tenth trading day, the average increase from the low to the peak exceeded 2%.
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It is noteworthy that in the aforementioned 25 events, the VIX fell back below 30 within approximately 10 to 15 trading days in 22 of those events. JP Morgan emphasized that the direction of the VIX movement is crucial—historically, gold has performed strongest in a high and declining VIX environment, contrasting sharply with its weakest performance in a high and rising VIX environment, highlighting the key significance of VIX trend direction as a tactical signal for short-term gold prices.
The bank also cautioned about tail risks: during the 2008 global financial crisis, as well as the 2011 and 2020 COVID-19 pandemic, the VIX remained elevated for an extended period, causing the gold price rebound process to be prolonged or even interrupted, which are exceptions to this pattern that investors should remain vigilant about.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/174ce6cc-bdc4-4c13-a07e-a32820707615.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/174ce6cc-bdc4-4c13-a07e-a32820707615.png"/>
<h2>Longer-Term Bullish Logic: Inflation Hedge Value and Fed Policy Shift</h2>
JP Morgan believes that if the blockade of the Strait of Hormuz continues, gold will ultimately rise significantly from a longer-term perspective, supported by two mutually reinforcing logical arguments.
The first is the inflation hedge value. The bank reviewed five historical periods since 2000 when the U.S. CPI rapidly and continuously rose by more than 2.5 percentage points: except for the inflation cycle following the pandemic from 2020 to 2022, gold recorded double-digit increases in the other four periods, outperforming the Bloomberg Commodity Index (BCOM). The post-pandemic inflation is due to a positive demand shock combined with supply chain constraints, resulting in overall commodity price increases far exceeding those of gold, which is a special circumstance. JP Morgan believes that if this oil price shock evolves into a stagflation environment, the inflation hedge value of gold will become even more pronounced
The second is the expectation of a shift in Federal Reserve policy. JP Morgan cited an analysis from its economists, indicating that the current moderate rise in oil prices tends to support the Federal Reserve in maintaining interest rates unchanged; however, if oil prices continue to surge significantly to $120 per barrel or higher, the risks of economic downturn will increase non-linearly, and the labor market will face substantial drag. Although overall inflation will be high at that time, the transmission to core inflation will be relatively limited, and the Federal Reserve is expected to shift towards easing due to its dual mandate concerning employment. JP Morgan emphasized that once the path for interest rate cuts by the Federal Reserve accelerates, it will significantly amplify the upward momentum for gold

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After the Iran conflict, gold prices have fallen by 6%, raising doubts about its safe-haven properties. JP Morgan believes this is not a failure of function, but rather a "liquidity squeeze" caused by margin calls and a strengthening dollar in the early stages of market pressure. Historical data shows that such pullbacks typically recover within 4 trading days. With the extension of the blockade of the Strait of Hormuz, energy inflation and the potential policy shift of the Federal Reserve will reshape the bullish logic. The bank maintains a strong bullish stance, estimating that gold prices are likely to challenge USD 6,300 per ounce by the end of the year

- Since the outbreak of the Iran conflict, gold prices have declined by about 6%, raising questions about its safe-haven status.  
- JPMorgan Chase attributes this initial sell-off to historical trends and factors such as rising energy prices and increased market volatility, which typically compel investors to reduce risk exposure.  
- The bank maintains a bullish long-term outlook for gold, forecasting prices to rise to $6,300 per ounce by Q4 2026, indicating potential inflation and Federal Reserve policy shifts may drive further gains.

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Why did gold drop after the Iran war? JP Morgan: In the early stages of market turmoil, gold is often sold off first, and then may quickly turn to rise