Although the price did rise by 12% over the year, many market players are surprised that gold is losing ground in the current crisis, notes the German Hundelsblatt. However, a closer look at the market dynamics makes it clear: the change in price does not contradict the function of the precious metal as a reliable asset.
The war in Iran and the blockade of the Strait of Hormuz led to a drop in quotations on stock markets around the world. Investors who had bought shares on credit came under pressure. They were suddenly faced with high requirements for additional collateral.
In order to obtain this additional collateral, they often have to sell part of their assets first. In doing so, investors often choose gold. This was also evident on “Emancipation Day” last April. At that time, US President Donald Trump imposed duties on goods from many countries, causing the price of gold to drop by about 5%.
Gold played the role it usually takes on in high-risk events,” Sookie Cooper, head of Global Commodities Research at Standard Chartered, told Bloomberg news agency: “When cash is under pressure, gold is often one of the first assets investors look at – especially if it’s performed well.
Capital outflows from gold ETFs
The reason for this is that gold is highly liquid. This precious metal can be sold quickly, which is why it is often sold first in times of tension. By selling gold, investors can provide themselves with the liquidity they need.
Shortly before the war began, asset management companies bought gold en masse. This is evidenced by the data of the World Gold Council (WGC) on gold-backed ETFs, the main investment instrument of institutional investors. In January, these funds received 120 tons of gold. In February, the market also recorded an inflow of funds. However, the trend may change in March: for the first time since May 2025, the volume of withdrawals may exceed the volume of new investments.
Thus, a pattern known from earlier geopolitical crises can be traced: with the beginning of the conflict, the price rises and then declines, explains the development of the situation Hundelsblatt.
Unfavorable situation with interest rates
High interest rates tend to have a negative effect on gold. After all, a precious metal that does not generate regular income loses its attractiveness compared to other assets that are considered safe, such as bonds or deposits.
Because of the war, the market expects energy prices to rise and inflation to accelerate and therefore no longer counts on the US Federal Reserve cutting interest rates twice as before.
However, the correlation between the gold price and interest rates has increasingly weakened over the past two years. Investors have been reallocating portfolios, shifting from bonds to precious metals, as they have lost confidence in the financial stability of developed countries such as the United States. This strategy is called currency devaluation trading.
A war in Iran is unlikely to ease the burden on the U.S. budget, rather the opposite. It is likely to increase spending. In addition, an energy crisis could simultaneously lead to slower economic growth and high inflation – that is, so-called stagflation – which tends to create favorable conditions for gold.
“The longer the conflict between the U.S. and Iran lasts, the higher the risk of negative economic consequences, which is expected to strengthen the demand for gold as a hedge,” UBS head of investment Mark Haefele wrote in a commentary on the market situation. Therefore, UBS still expects new record highs and stays with its forecast that the price could reach $6,200 per ounce.
Other analysts also believe that the factors contributing to gold prices remain unchanged. “In the long term, the war will strengthen the positive sentiment towards gold and its investment attractiveness, regardless of its outcome,” – quotes the experts of consulting company Metals Focus.
