Short‑term price swings may grab attention, but gold’s value lies in what it adds to a diversified portfolio.
Dharmo Soejanto
Head of Investment Solutions, UOB Asset Management
Gold’s sharp pullback in March, followed by heightened volatility through April, has prompted understandable questions from investors. While large price swings may appear counterintuitive for a perceived safe haven asset, history suggests that such episodes are not unusual during periods of market turmoil. More importantly, recent price actions do not, in our view, signal a structural change in gold’s longer‑term role in portfolios.
Key factors behind the March pullback
Gold was one of the best-performing asset classes in 2025, supported by a combination of strong central bank demand, rising macroeconomic uncertainty, a weaker US dollar, and positive price momentum.
When the Middle East conflict first broke out, gold initially appeared poised to continue behaving as a safe haven asset. Prices moved higher in early March as geopolitical risks escalated. However, the trend reversed as the month progressed, and gold ended March around 12 percent lower at US$4,688 per ounce.
The pullback was driven by a confluence of short‑term forces that outweighed safe haven demand for gold:
- Higher oil prices and renewed inflation concerns led to a stronger US dollar and rising interest rate expectations, which reduced the near‑term appeal of non‑yielding assets like gold.
- Liquidity needs and profit‑taking led some investors to sell gold – a highly liquid asset – to meet near‑term funding requirements, while others sought to lock in gains following the strong rally in 2025.
- Unwinding of speculative positions, particularly in gold ETFs, added to downside pressure as price declines triggered accelerated outflows. Total known holdings of gold in ETFs, a proxy for gold demand, declined by 3 percent over the month1.
- Technical factors, including stop‑loss orders, amplified price moves once gold breached key support levels.
These dynamics have not fully dissipated and continue to contribute to gold price volatility moving into April.
Volatility remains elevated
Since the start of April, gold prices have continued to experience various ups and downs, and currently sit around US$4,782 per ounce (as of 21 April 2026). While prices have recovered from their March lows, market conditions remain unsettled.
Developments in the Middle East continue to be highly uncertain, and adverse outcomes could weigh on gold prices in the near term. Against this backdrop, gold prices are likely to remain sensitive to changes in interest rate expectations, currency dynamics and investor positioning. As a result, investors should expect continued price fluctuations even in the absence of new fundamental shifts.
This has happened before
While the current volatility may feel uncomfortable, such episodes are not unusual for gold during periods of heightened uncertainty. Historical data shows that spikes in gold volatility tend to be temporary, typically easing within 1.5 to 2 months on average2.
The recent sell‑off is also not unprecedented. Similar patterns were observed during major global disruptions, including the Global Financial Crisis in 2008, the early stages of the COVID‑19 pandemic in 2020, and following Russia’s invasion of Ukraine in 2022. Gold experienced initial drawdowns as it was used as a source of liquidity, before subsequently stabilising or recovering. Importantly, these moves were driven by short-term market dynamics rather than a weakening of gold’s underlying fundamentals.
Longer-term case for gold remains intact
Despite near‑term volatility, we believe the longer‑term outlook for gold remains well supported by structural drivers:
- Persistent geopolitical uncertainty continues to underpin demand from both institutional and retail investors.
- A longer-term trend of US dollar weakness supports gold demand by making it relatively more affordable for non-US investors to buy.
- Ongoing diversification away from the US dollar continues to support central bank demand, as countries seek to reduce reliance on the dollar by increasing allocations to gold as a neutral reserve asset.
A worthy addition to portfolios
Ultimately, we believe gold continues to play a strategic role in portfolios, particularly as a diversifier for long-term investors. Its historically low correlation with equities and bonds helps enhance diversification and reduce overall portfolio risk – a benefit that has held even during recent bouts of heightened volatility3.
Gold has also tended to preserve its value during inflationary periods, helping protect purchasing power over time. Rising defence spending and higher energy costs point to sustained inflationary pressures, reinforcing gold’s role as an inflation hedge.
Taken together, gold’s diversification and inflation‑hedging qualities highlight its value as a strategic allocation in well‑diversified portfolios.
Find out more
Watch the interview below to explore why gold continues to play an important role in portfolio diversification, particularly during periods of elevated uncertainty.
1Source: NinetyOne, as of 31 March 2026
2Source: World Gold Council, March 2026
3Source: World Gold Council, March 2026
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