Gold drops 12% in March: Goldman and UBS explain

Gold has entered March with a strong upward momentum, but then it went through one of the most notable reversals of the year, when prices plunged by nearly 12% in just one month. According to two major financial institutions, Goldman Sachs and UBS, many factors have pushed this precious metal down at the same time—ranging from changes in expected interest-rate movements to investors taking profits.

Gold Falls Sharply After Hitting a Peak

After a period of rapid gains, gold failed to maintain its momentum in March. Although it is widely seen as a safe-haven asset, the precious metal still faced heavy selling pressure as the market adjusted its expectations for the monetary policy of the U.S. Federal Reserve (the Fed).

Goldman Sachs and UBS believe that gold’s decline does not reflect a long-term weakening of the uptrend, but is mainly due to investors taking profits after the price rose too quickly in a short period.

Goldman Sachs: Profit-Taking and a Stronger U.S. Dollar

According to Goldman Sachs, one of the main reasons gold has weakened is an increase in profit-taking after the price repeatedly set new highs. As market sentiment became more cautious, many investors sold to lock in gains.

In addition, a stronger U.S. dollar also puts pressure on gold, because this precious metal is priced in USD. When the greenback rises, gold becomes more expensive for buyers holding other currencies, thereby reducing demand.

Goldman Sachs also noted that shifts in the Fed’s interest-rate expectations have led the market to reprice the outlook for assets that do not generate yield like gold.

UBS: The Market Is Adjusting After an Overheated Run

UBS views this drop as a healthy correction after a period of overly strong gains. According to the bank, gold is still supported by underlying factors such as geopolitical uncertainty, concerns about inflation, and the need to diversify investment portfolios.

However, UBS believes that in the short term, the market has been pulled into an overbought zone. That means that any unfavorable signal, even a small one, could trigger a broad wave of selling.

The Long-Term Outlook Remains Positive

Despite March recording a sharp decline, both Goldman Sachs and UBS have not changed their positive long-term view on gold. These two institutions believe that if inflation remains persistent, the global economy continues to face risks, and the Fed is still not able to ease policy aggressively, gold could continue to receive significant support in the period ahead.

In other words, the 12% drop in March may only be a temporary pullback within a larger uptrend, rather than a signal that gold’s bull cycle has ended.