Looking back at the precious metals market performance this year, it becomes clear that gold has not served its traditional role as a safe haven during the recent U.S.-Iran conflict. Instead, its price has trended lower. The core reason lies in a different transmission path for this conflict, triggering a chain of events highly unfavorable for gold: "high oil prices → soaring inflation expectations → heightened Fed rate hike expectations → rising real interest rates → a stronger U.S. dollar."
Specifically, the following key factors have exerted downward pressure:
1. High Oil Prices and Inflation Expectations 'Backfired' on Gold (Core Reason)
The logical chain: The U.S.-Iran conflict directly pushed up crude oil prices, particularly due to risks of a Strait of Hormuz blockade. High oil prices fueled global inflation expectations, leading markets to worry that the Federal Reserve might be forced to adopt a more hawkish stance or even resume interest rate hikes.
2. Pressure from a Strong Dollar and Treasury Yields
The logical chain: Driven by both inflation fears and global safe-haven buying, the U.S. Dollar Index strengthened, and U.S. Treasury yields climbed. As a zero-yield asset, gold becomes less attractive when the dollar and U.S. bond yields rise, as the opportunity cost of holding it increases.
3. 'Liquidity Squeeze' Triggered Gold Selling (Key to Safe-Haven Failure)
The logical chain: The widespread impact of this conflict forced some oil-importing nations, such as Turkey, to sell gold to obtain U.S. dollar liquidity, as surging oil prices drastically increased their foreign exchange costs. Consequently, gold became an asset to be liquidated.
During the initial wave of conflict in early 2024, Turkey reportedly sold 58 tons of gold over two weeks to secure dollars, directly weighing on the gold price. This phenomenon of "selling for liquidity" is a crucial reason for the short-term failure of gold's safe-haven properties. In a genuine crisis, the first instinct of capital is to seek cash, specifically U.S. dollars, not gold. Gold itself can become a source of funds to be sold for dollars.
4. Artificially Created Volatility for a Strong Dollar Objective
The logical chain: Following the appointment of the new Federal Reserve Chair Warsh, a policy favoring a strong dollar has been pursued. This involves creating ambiguous communication between the Fed and markets, leveraging media influence to signal potential rate hikes, and thereby directing massive liquidity flows towards the dollar. This has created a sustained drain of capital from the precious metals sector. The Fed's vague stance and "data games" continue to erode the attractiveness of holding precious metals.
Therefore, in this U.S.-Iran conflict, gold's "safe-haven attribute" has been completely overshadowed by the "inflation panic" and "liquidity crunch" triggered by high oil prices, presenting an appearance of "safe-haven failure." However, it is important to note that this does not signify the end of gold's long-term uptrend. Once the conflict genuinely de-escalates, inflation expectations recede, or the liquidity crisis eases, gold's "long-term drivers"—such as weakening U.S. dollar credibility, central bank purchases, and global order restructuring—are likely to regain control of the market narrative.
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