Spot gold rose 1.0% to $1,713.92 per ounce by 1:20 p.m. ET, after falling below the $1,700 level for the first time since March 2021. US gold futures recovered 0.7%, trading at $1,712.00 per ounce in New York.

Meanwhile, both European stocks and bonds slumped and the euro rose after the ECB joined global central banks in driving outsized rate increases to combat inflation.

The rate hike, the first by the ECB in over a decade and its largest since 2000, comes as a brewing political crisis in Italy ramps up the pressure on the central bank to shield the most vulnerable euro zone members from market speculation.

“We view gold as the defensive play against broader market turmoil and rampant inflation,” BMO Capital Markets analyst Colin Hamilton said in a Bloomberg note.

The precious metal has been volatile this year, rallying to a near record above $2,000 an ounce in March after Russia’s invasion of Ukraine. It has since lost 18% as the US Federal Reserve tightened monetary policy and the dollar soared on the back of rising interest rates, haven demand and recession fears.

“Gold remains caught between elevated inflation, growing concerns over a recession and a flight to quality on the one hand, but sharp rate hikes, a strong USD and seasonally weak demand on the other,” Standard Chartered analyst Suki Cooper told Reuters.

Before the ECB’s decision, bullion had been struggling to maintain its traditional status as a haven asset, according to Jeffrey Halley, a senior market analyst at Oanda Corp.

“There’s a risk prices could fall further toward $1,450 to $1,500 an ounce, should support at around the $1,675 level fail,” Halley added.

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