To The Moon

Why Haven't Gold and Silver Recovered After the Massive Selloff?

On March 5, the precious metals market still showed no clear signs of recovery. Spot gold (XAU/USD) $SPDR Gold ETF(GLD)$   fell about 1%, while silver (XAG/USD) $iShares Silver Trust(SLV)$   declined roughly 2.5%. Mining stocks remained under pressure as well. Gold miner $Anglogold Ashanti(AU)$   dropped 4.5%, $Barrick Mining Corporation(B)$   fell 3.4%, while major producers  $Newmont (NEM.US)$ and $Agnico Eagle (AEM.US)$ declined about 2.6% and 4.2%, respectively. Silver miners saw steeper losses, with First $First Majestic Silver (AG.US)$ down 6.2%, $Endeavour Silver (EXK.US)$ falling 5.4%, and $Silvercorp Metals (SVM.US)$ losing 5%, suggesting investors are still reducing exposure to the sector.

This performance indicates that the sharp selloff on March 3 has yet to see a meaningful rebound. On that day, spot gold fell 5.4%, silver plunged more than 10%, and mining stocks broadly dropped 10%–14%. Against the backdrop of escalating geopolitical tensions, precious metals falling sharply may appear somewhat unusual.

At first glance, rising geopolitical risks should boost safe-haven demand. However, the market is not pricing “fear,” but rather an “inflation shock.” As tensions in the Middle East threaten energy supply—particularly involving Iran and the Strait of Hormuz—investors worry more about oil-driven inflation than financial instability. Higher oil prices imply stronger inflation pressure, which in turn suggests central banks may keep rates higher for longer. This dynamic supports the U.S. dollar and pressures dollar-denominated metals.

Recent macro data has reinforced this view. ADP private employment rose by 63,000 in February, beating expectations, while the ISM Services PMI climbed to 56.1 from 53.8, well above the 53.5 forecast. Stronger data has supported the dollar and weakened bets on near-term monetary easing.

Meanwhile, expectations for a near-term dovish pivot by the Federal Reserve are fading. According to the CME FedWatch Tool, traders broadly expect no rate cuts in the first half of the year. In such an environment, non-yielding assets like gold and silver become less attractive because they typically perform better when interest rates are lower.

Ultimately, the key pricing variable for precious metals is real interest rates, not the war itself. When nominal rates stay high and inflation expectations rise due to energy shocks, real rates tend to remain elevated. Because precious metals do not generate yield, higher real rates increase the opportunity cost of holding them. In other words, if geopolitical tensions lead to higher oil prices, stronger rate expectations, and a stronger dollar, declines in gold and silver are not contradictory.

The larger declines in mining stocks reflect their equity leverage to metal prices. Mining profits are highly sensitive to commodity prices, while rising energy costs can squeeze margins. In periods of falling risk appetite, investors typically reduce exposure to higher-volatility sectors first, amplifying declines.

Overall, the current environment resembles an “inflation-shock” risk regime. In financial crises, falling rates and expanding liquidity tend to support gold. In contrast, the current geopolitical tensions are reinforcing the inflation and energy narrative, not easing expectations. As long as the dollar remains strong and real rates stay elevated, precious metals may struggle to form a sustained rally.

For investors, the key variables to watch are the U.S. dollar and real interest rates rather than geopolitical headlines. If oil prices retreat and real rates begin to fall, precious metals could recover. If the dollar continues to strengthen, however, gold and silver may remain under pressure.

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