The move defies expectations during a geopolitical crisis
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Gold is falling despite geopolitical turmoil as investors flock to the U.S. dollar instead
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Higher interest rates and inflation expectations are undercutting golds appeal
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Analysts say macroeconomic forces are overwhelming golds traditional safe-haven role
Theres war in the Middle East. Oil prices are surging. Gold prices should also be surging, but theyre not. Theyre going down.
Gold, long regarded as a reliable refuge during times of geopolitical upheaval, is defying expectations. Even as tensions escalate in the Middle East, prices for the precious metal have moved sharply lower, leaving some investors puzzled.
Market analysts say the explanation lies not in a breakdown of golds traditional role, but in the unusual economic dynamics surrounding the current crisis.
Dollar strength is one reason gold is going lower
Instead of flowing into gold, capital is pouring into the U.S. dollar, which has surged as global investors seek liquidity and safety. Because gold is priced in dollars, a stronger greenback makes the metal more expensive for buyers using other currencies, dampening demand.
This shift points to a key reality: gold is not the only safe haven. In periods of financial stress, especially those tied to energy markets and global trade, cashand particularly dollar-denominated assetscan take precedence.
Another major factor weighing on gold is the outlook for interest rates.
The conflict has driven oil prices higher, raising concerns about renewed inflation. In turn, investors increasingly believe central banksespecially the Federal Reservewill keep interest rates elevated for longer than previously expected.
Higher rates are negative for gold
That dynamic is typically negative for gold. Unlike bonds or savings instruments, gold does not generate income. When yields on safer assets rise, the opportunity cost of holding gold increases.
While gold is often viewed as a hedge against inflation, the current environment is more complex, analysts say.
Mark Haefele, chief investment officer at UBS Global Wealth Management, says weve seen this pattern before.
For instance, gold jumped 15% after the start of the Russia-Ukraine conflict in 2022, but then declined by 15-18% as the Federal Reserve raised rates, he told Morningstar. The same happened during the Gulf War and Iraq War; prices rose 17% and 19%, respectively, at the start but decreased as tensions eased.
Higher energy prices are feeding inflation fears, but they are also reinforcing expectations of tighter monetary policy. In the short term, that combination tends to pressure gold rather than support it.
In other words, inflation is working against gold indirectly by keeping interest rates high.
Profit-taking and liquidity pressures add to the decline
Golds recent drop also reflects investor behavior following a strong run-up earlier this year. Prices had climbed significantly before the latest escalation, prompting some traders to lock in gains.
At the same time, periods of market volatility often trigger broader selling. Investors may liquidate gold positions simply because they are profitable and easy to sell, using the proceeds to cover losses elsewhere or raise cash.
The current downturn reinforces a broader shift in how markets are reacting to geopolitical events. While gold still responds to uncertainty, its price is increasingly influenced by interest rates, currency movements, and central bank policy. For now, those forces are pointing downward.
Posted: 2026-03-23 13:18:57

















