News

Key points:

• Gold’s recent selloff reflects liquidation and higher yields - not a breakdown in safe-haven demand.
• An inflation shock driving up bond yields while lowering rate cut expectations and dollar strength have been the primary headwinds.
• Structural support from central banks and diversification demand remains intact.
• Ceasefire-driven macro shift has triggered a sharp rebound in gold and silver

Gold’s recent correction has challenged the widely held perception of bullion as a reliable safe haven during times of geopolitical stress. However, the latest price action should not be mistaken for a structural shift. Instead, it reflects a combination of macro headwinds and positioning dynamics following an extended rally.

At the core of the decline has been the nature of the shock itself. Unlike traditional risk-off environments that support gold, the Middle East conflict triggered a supply-driven inflation shock. Surging energy prices lifted inflation expectations, prompting a reassessment of central bank policy paths. Rate cut expectations were pushed out, bond yields moved higher, and the dollar strengthened - all factors that typically weigh on non-yielding assets such as gold.

At the same time, positioning played a key role. After a strong multi-month rally that saw gold trade significantly above its long-term trend, the market had become increasingly crowded. This left it vulnerable to bouts of long liquidation as investors reduced risk exposure and raised cash amid broader market volatility. In that sense, the correction has been as much technical as fundamental.

During the March correction, total holdings in bullion-backed ETFs fell 94 tons to 3,044 tons before rebounding by nearly 20 tons so far this month. In perspective, that reduction amounts to roughly 2½ months of buying and remains modest compared with the 545 tons accumulated during 2025.

Importantly, there is limited evidence to suggest a wholesale rotation away from gold into alternative assets. During the height of the selloff, flows were largely directed toward cash and short-duration fixed income, supported by rising yields and a stronger dollar. Energy exposure also acted as a more direct hedge against geopolitical risk. However, this dynamic has proven fluid, with recent developments triggering a partial reversal.

Looking ahead, gold’s trajectory will remain closely tied to macro variables, particularly real yields, dollar direction, and expectations around monetary policy. While near-term volatility is likely to persist, the broader outlook remains constructive. Continued central bank demand, ongoing geopolitical uncertainty, and concerns around fiscal sustainability all provide underlying support.

In that context, the recent decline appears more consistent with a correction than the beginning of a prolonged bear market. However, the duration and depth of the adjustment will depend on whether elevated real yields persist or begin to ease in response to softer growth signals.

Ceasefire triggers sharp rebound across precious metals

Today’s market response to the announced US-Iran ceasefire was imminent and pronounced with crude oil, fuel and bio-fuel linked crops all selling off while metals, both precious and industrials witnessed a strong comeback. Gold has rallied 2% to USD 4,805, a two-week high, while silver has surged 6% to USD 77.40, also marking a two-week peak.

The move has been driven by a reversal of the very factors that pressured prices in recent weeks. Bond yields have declined as inflation concerns ease, allowing rate cut expectations to re-emerge. At the same time, the dollar has weakened by more than one percent, providing additional support to dollar-denominated commodities.

Silver has outperformed, benefiting not only from lower yields and a softer dollar but also from its industrial exposure. Improved risk sentiment and reduced recession fears have supported copper prices, reinforcing demand expectations for silver through its industrial linkage.

Strategy and positioning

For investors, the recent price action reinforces the importance of distinguishing between short-term macro-driven volatility and longer-term structural trends.

From a tactical perspective, gold remains highly sensitive to interest rate expectations and currency moves, suggesting that timing remains important. From a strategic standpoint, however, the case for holding gold as a portfolio diversifier remains intact, particularly in an environment characterised by elevated geopolitical risk and ongoing macro uncertainty.

In practical terms, this argues for a measured approach. Long-term investors may view the recent correction as an opportunity to gradually rebuild exposure, while shorter-term participants may prefer to await clearer confirmation that yields and the dollar have peaked.

• Sticky inflation hurts weak business models more than equities as an asset class.

• Pricing power matters most when costs rise and rate cuts start to vanish.

• Energy, select property, defensives, healthcare and some industrials can hold up better.

Bloomberg reported on 25 March 2026 that Trump administration officials are examining what oil at as much as 200 USD a barrel could mean for the economy. That sounds extreme, but markets are already treating it as more than a distant thought experiment. The message for investors is not that higher inflation means “sell equities.” It is that higher inflation raises the bar for what counts as a good equity.

Cash and fixed income are often the most exposed when inflation stays high, because their nominal payments do not rise with the cost of living. Over longer periods, equities have historically done a better job of preserving real returns across different inflation environments. Hartford Funds adds an important warning, though: equities beat inflation 90% of the time when inflation is low and rising, but when inflation is high and rising, the short-term record looks little better than a coin toss. Equities remain the broad long-term defence, but the real protection comes from owning businesses with pricing power.

The problem is not inflation. It is weak business models

Inflation tends to expose what was already fragile. Companies with thin margins, too much debt, weak brands or highly discretionary products have less room to absorb cost shocks. If they cannot raise prices, margins get squeezed. If they need lower interest rates to make the valuation story work, a higher-rate backdrop becomes a second headache. Warren Buffett has long argued that companies earning consistently high returns on invested capital, meaning they turn capital into profits efficiently, often have pricing power.

That also explains why inflation is not equally bad for every equity sector. The question is not whether costs rise. They usually do. The question is who gets to pass those costs on, who keeps demand, and who still looks necessary when households and businesses start choosing a bit more carefully.

The sectors built to cope

Integrated energy Energy is the clearest place to start because its revenues are tied most directly to the thing pushing inflation higher. Hartford’s work shows energy has historically been one of the strongest sectors in high and rising inflation, beating inflation 74% of the time with average real returns of 12.9%. If oil stays high, producers and energy infrastructure often benefit first. Good examples are large integrated groups and system-level operators such as Exxon Mobil, Chevron, Shell, TotalEnergies and Enbridge. They are different businesses, but they share real assets, scale and a more direct link between higher energy prices and cash flow.

Property and infrastructure Property and infrastructure-like assets can also help, though with more nuance. Hartford shows equity real estate investment trusts, or REITs, beat inflation 66% of the time in high and rising inflation periods because rents and asset values can reset over time. The same logic can apply to selected tower, logistics and regulated network businesses, where contracts, leases or tariff structures allow some repricing. Prologis, American Tower, Equinix, NextEra Energy and Southern Company fit that mould. The catch is that utilities still answer to regulators, so pass-through is not always quick or complete. Safe is not the same as bulletproof.

Consumer defensives, luxury and healthcare Consumer defensives and healthcare usually hold up better when inflation starts to hurt growth as well as prices. People may trade down, but they still buy groceries, detergent, medicines and basic care. Morningstar’s 2026 market-rotation work highlights consumer defensives among the leadership groups outside technology, and the wider lesson is simple: durable brands and habitual demand matter more when the weather turns messy. Walmart, Costco, Procter & Gamble, Coca-Cola and Unilever fit that logic. So, in a very different way, do high-end luxury names such as Ferrari, Hermès and LVMH, where brand strength and scarcity can support pricing power at the top end. In healthcare, names such as Johnson & Johnson, Roche, Merck, Eli Lilly and Danaher stand out for less cyclical demand and stronger competitive positions.

Select industrials Select industrials deserve more credit than they often get. Reuters noted this week that industrials can pass on higher costs better than many assume, especially when they sell mission-critical equipment, replacement parts, grid hardware or services into bottlenecked markets. That makes the sector more interesting than the simple “cyclical equals vulnerable” label suggests. Caterpillar, GE Vernova, Honeywell, Schneider Electric and Eaton are good examples. The better businesses are not just selling machinery. They are selling uptime, installed bases, service contracts and hard-to-delay spending. In inflationary periods, that distinction matters a lot.

The catches arrive quietly

This thesis still has risks. First, not every “defensive” stock has real pricing power. Some simply have defensive branding and little else. Second, if oil falls quickly because the conflict cools, energy’s tailwind can fade just as fast as it appeared. Third, high inflation can still hurt equities overall by compressing valuations, especially for businesses whose profits sit far in the future.

Investor playbook

• Stress-test business models, not just inflation forecasts. Ask who can raise prices without losing customers.

• Prefer strong balance sheets and steady demand over stories that need cheaper money to look sensible.

• Treat sector labels carefully. A good industrial can beat a weak defensive.

• Think in layers: broad equity exposure for long-term inflation defence, then tilt toward pricing power.

The real hedge is business quality

When officials start stress-testing 200 USD oil, investors should probably stress-test portfolios too. Not by assuming disaster, and not by dumping equities on sight, but by asking a simpler question: who can still protect margins if inflation lingers and rate cuts keep moving further away? That is the real dividing line.

Inflation is not a verdict on equities. It is an exam for business quality. The winners are often less glamorous than the last market darling, which is mildly inconvenient for cocktail-party storytelling, but rather useful for compounding. In an inflation scare, better equities matter more than brave predictions. That is the part worth remembering once the oil headline fades.