Despite rising geopolitical tensions, gold prices declined last week, prompting concerns about whether the precious metal’s strong rally has gone too far.
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Gold Price Forecast: XAU Retreats Despite Conflicts and China Buying Spree – Is This A Bearish Signal?
Despite rising geopolitical tensions, gold prices declined last week, prompting concerns about whether the precious metal's strong rally has
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Last updated: Monday, March 9, 2026
Quick overview
- Gold prices fell last week, marking a 2% weekly loss despite rising geopolitical tensions in the Middle East.
- China's continued accumulation of gold reserves supports long-term demand, but it wasn't enough to prevent the recent price decline.
- Analysts are questioning whether gold's recent rally has become overextended, as investors may be taking profits amid geopolitical uncertainty.
- Technical indicators show a significant correction, but gold managed to hold crucial support levels, suggesting potential for recovery.
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Gold Retreats Despite Escalating Conflict
Gold prices came under pressure last week, falling sharply even as geopolitical tensions intensified in the Middle East. The precious metal dipped below the $5,000 level and recorded a 2% weekly loss, marking its first weekly decline in five weeks and only the second pullback so far this year.
The decline surprised many market observers because gold traditionally benefits from geopolitical instability. The ongoing conflict involving the United States, Israel, and Iran would normally trigger stronger demand for safe-haven assets. However, gold instead experienced a significant drop, with XAU/USD plunging more than $400 during the week.
When markets reopened during the Asian session on Monday, gold prices started slightly lower again despite fresh geopolitical headlines.
China Continues Aggressive Gold Buying
One factor continuing to support the long-term gold narrative is China’s steady accumulation of gold reserves. The People’s Bank of China (PBOC) has been consistently increasing its holdings, extending its gold buying streak to 16 consecutive months.
China’s gold reserves reached 74.22 million troy ounces at the end of February 2025, compared with 74.19 million ounces in January. In value terms, China’s gold holdings rose to approximately $387.59 billion by February 2026, up from $369.58 billion the previous month.
China has become one of the largest and most consistent buyers of gold globally, reinforcing its strategy of diversifying reserves away from traditional foreign currency assets.
However, even this sustained central bank demand was not enough to prevent gold from experiencing a notable short-term correction.
Signs of an Overextended Rally?
The muted response from gold despite escalating geopolitical risks has led some analysts to question whether the metal’s rally may have become overextended. After a strong multi-month surge, investors may be taking profits or repositioning portfolios.
If geopolitical tensions fail to produce sustained safe-haven demand, gold could face further consolidation in the near term. However, long-term structural drivers—including central bank buying and global uncertainty—continue to provide underlying support for the precious metal.
Technical Damage — But a Crucial Hold
Technically, the correction was severe. Gold broke decisively below its 20-day simple moving average, ending a streak of consistent trend support.
Attention quickly shifted to the 20 week-day moving average near $4,400. Crucially, that level held. Buyers emerged aggressively at that support zone, halting the decline and triggering a strong rebound.
Gold Chart Weekly – MAs Continue to Support on Pullbacks
The recovery above $5,000 carries psychological importance. Reclaiming such a major round-number threshold often stabilizes sentiment, especially after a period of forced liquidation. While volatility remains elevated, the ability to defend longer-term trend support suggests that structural buyers remain active.
The market now appears to be transitioning from panic-driven liquidation toward consolidation.
Market Reaction to Geopolitical Developments
Over the weekend, geopolitical developments continued to unfold rapidly. Iran initially suggested it might stop attacking neighboring countries if those nations refrained from hosting strikes against Iranian targets. However, strong rhetoric from former US President Donald Trump followed, prompting Iran to reverse its earlier signals.
Adding to the uncertainty, Iranian state media reported that Mojtaba Khamenei, the son of Iran’s Supreme Leader, had been named the country’s new Supreme Leader. Israel has previously stated it would target future Iranian leadership, leaving the newly appointed leader in a precarious position.
Meanwhile, US Senator Lindsey Graham further escalated political rhetoric by suggesting broader geopolitical confrontations could follow, even referencing Cuba as a potential future conflict zone.
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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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