Gold Drops 2.8% After US-Iran Talks, COMEX Spike

Introduction

This week’s gold action was driven by concrete macro and geopolitical developments that moved prices sharply and predictably. A diplomatic thaw between the U.S. and Iran removed a key safe-haven bid, sending spot gold lower, while heightened activity on COMEX and continued central-bank purchases provided important counterweights. The net effect: a rapid repricing of risk without erasing structural support for bullion.

Key Drivers This Week

U.S.–Iran Talks Reduce Safe-Haven Demand

On February 17, the opening of diplomatic talks between U.S. and Iranian representatives in Geneva was reported widely and immediately affected investor sentiment. Gold fell approximately 2.8%, trading near $4,882–4,900 per ounce on the day, as the market scaled back a portion of the geopolitical risk premium. When diplomacy replaces the prospect of conflict, assets like gold—valued primarily as insurance—tend to see swift outflows as traders rotate back into risk-sensitive positions.

Elevated COMEX Activity Amid Volatility

Precise market activity underscored how traders reacted: COMEX gold futures saw a notable spike in volume, with daily volumes reported near 150,553 contracts and open interest around 403,982 contracts. Higher-than-normal turnover signals active repositioning by speculators and hedgers rather than a quiet sell-off. Heavy volume during directional moves increases the chance of short-term follow-through, but the relatively stable open interest suggests many positions were being reallocated rather than fully exited.

Goldman Sachs: Rally, but Not a Commodity Supercycle

Goldman Sachs published analysis in the week reaffirming that the bullion rally is driven by a specific set of drivers—central bank purchases, lower U.S. rate expectations, and fiscal concerns—rather than a synchronized upswing across all commodities. The bank noted recent price swings (gold had traded above $5,500 at one point before pulling back toward the $4,900 area) and projected a medium-term target near $5,400 by late 2026. Their caution is useful: it reframes the rally as structurally supported but concentrated, not indiscriminately broad-based.

China and Central Bank Buying Provide Structural Support

Separate from short-term headline shocks, sovereign accumulation—particularly from China’s central bank—continues to act as a price floor. Central bank purchases of gold are a persistent, one-way source of demand that stabilizes prices during episodic sell-offs. Think of these purchases as an anchor beneath a ship: waves can rock the vessel, but the anchor prevents it from drifting far.

Market Implications and Positioning

Short-term: The diplomatic development demonstrated how quickly safe-haven premiums can be unwound, producing a fast correction in spot prices. Traders relying on geopolitical risk as a core bullish thesis saw immediate pain when headlines shifted.

Medium-term: Structural demand drivers—central bank purchases, option-market flows, and evolving rate expectations—remain supportive. Major banks’ forecasts that still point higher for gold suggest that the recent dip may present re-entry or accumulation opportunities for longer-term allocators.

Risk and Liquidity Considerations

• Thin holiday liquidity (e.g., Lunar New Year closures) amplified price moves; low-volume sessions increase volatility and slippage.
• Elevated futures volume during a downleg signals that speculative players are actively repositioning; this can produce follow-through if catalysts persist.
• Geopolitical headlines can reverse quickly—investors should size positions with attention to event risk.

Conclusion

This week’s sell-off was a textbook response to diminishing geopolitical risk: gold repriced as safe-haven demand eased, while robust COMEX turnover and steady central-bank buying prevented a deep, disorderly drop. Institutional commentary, such as Goldman Sachs’ assessment, frames the current environment as supportive for bullion over the medium term but cautions against reading the rally as a universal commodity resurgence. For investors, the balance is between respecting short-term headline volatility and acknowledging durable, sovereign-driven demand that underpins gold’s longer-term thesis.