Since the beginning of the war in the Middle East, the price of gold has dropped dramatically. Has the yellow metal lost its value as a safe haven?
The start of the Middle Eastern conflict immediately saw the price of gold drop from maximum peaks achieved only a few weeks earlier. If only a month ago, in mid-February, the precious metal was trading at more than $5200 an ouncein the last week the value has collapsed, falling to around 4570 dollars.
There are various reasons that seem to undermine the role of gold as a safe haven asset, some have to do with the decisions of the Federal Reserve, others, however, are probably attributable to strong liquidations of the metal now underway by Middle Eastern buyers.
The paradox of war
When the United States and Israel launched the first attacks against Iran on February 28, gold reacted as expected, rising from 5,296 to 5,423 dollars an ounce, in line with the principle according to which geopolitical turbulence is pushing investors towards traditional safe haven assets.
But then came the fix: a violent wave of selling caused the price to sink to $5,085 on March 3. From there, the descent never stopped. In the last three weeks, the metal has lost almost 9% since the beginning of the conflict, although it has remained in positive territory since the beginning of the year with a gain of around 9%.
A paradox that is difficult to explain with the categories of traditional finance alone; an open war, with the Strait of Hormuz largely blocked and the oil Brent rocketed to 115 dollars a barrelshould in theory have supported the value of gold.
It therefore seems that the strong growth recorded in the last two years has transformed the precious metal into a speculative assetdisorienting both large institutional investors and small savers accustomed to considering gold as insurance against chaos.
The Federal Reserve and the weight of high rates
One of the most important factors in gold’s decline is probably to be found in the decisions of the Federal Reserve. At its latest meeting, the Fed confirmed rates in the 3.50%-3.75% range, citing still high inflation and a solid labor market.
The updated projections indicate only one cut expected for 2026, but the volatile Middle Eastern situation could change the cards on the table, so much so that several American institutions are already betting on a rate increase by the end of the year.
Nonetheless, the message to the markets is clear: cuts are postponed. For a non-returning asset like gold, high rates mean an increasing opportunity cost compared to bondswhich now offer positive real returns.
It is certainly no coincidence that, in parallel with the decline in gold, US Treasury yields have risen, accentuating the outflow of capital from the metal towards paper.
Gulf sales and the dollar as a new refuge
Alongside monetary factors, there is a specific and so far little discussed market dynamic. The real “flight to safety” of 2026 is not rewarding gold, but the US dollar, which has strengthened significantly since the beginning of the conflict compared to other currencies.
Investors from the Gulf and the Middle East, who had accumulated large quantities of gold in recent months, they now find themselves having to face liquidity emergencies linked to the economic fallout of the conflict.
The result is a massive wave of selling of the metal to monetize in dollars. Paradoxically, it is precisely the war that produces the sales that depress gold.
This means that at present it appears very difficult to make predictions; The Middle Eastern conflict is rapidly turning into the largest energy shock in recent history. The timing of the end of the war appears more uncertain than ever, and with it, the price of gold.
