An analysis of gold price movements following 12 major Middle East conflicts since 1970 reveals that while short-term price increases are often limited, medium-term gains over a six-month period have averaged 10%. When at least three of the five key factors influencing gold prices are positive, the average six-month price increase has reached 34%. These factors include whether the conflict involves oil, pre-war market expectations, the speed of the conflict, the status of US dollar credit, and overall liquidity conditions. In the current conflict, while the first three factors related directly to the war's progression remain uncertain, the supportive trends of weakening US dollar credibility and accommodative liquidity conditions persist, leading to a positive outlook for future gold price appreciation.
Historically, periods of gold price increases in the six months following a Middle East conflict have consistently coincided with positive developments in either US dollar credibility or liquidity. Examples include the Yom Kippur War, the Iraq War, the 2008 Gaza War, the Libya conflict, and various Israeli-Palestinian and Iran-Israel clashes. During these episodes, the average six-month gold price increase was 26%, with an average excess return of 16 percentage points. While war-related factors can amplify short-term price volatility, the medium-term trajectory of gold is primarily determined by the underlying trends in dollar strength and liquidity. For the current conflict, these two supportive factors are expected to continue reinforcing each other.
First, the path towards accommodative liquidity remains intact, with concerns about "stagflation-like" conditions providing potential catalysts. Gold prices have typically accelerated during periods of weaker-than-expected US employment data over the past three years. Recent US non-farm payroll and unemployment data have again pointed to potential labor market softening, which could strengthen market expectations for interest rate cuts. It is anticipated that there will still be one to two 25-basis-point rate cuts during the year under the new Fed leadership, suggesting the accommodative liquidity environment will not reverse. Combined with the lagged effects of tariffs and oil prices on US inflation, real interest rates in major economies are expected to decline through the first three quarters, which should encourage ETF buying and support gold prices. Historically, only two post-conflict periods saw oil price surges lead to Fed tightening and subsequent gold price declines; both occurred when US inflation was already high. Current static inflation levels and the scale of oil price pass-through are significantly lower, and US policy direction differs substantially. Given gold's historical tendency to perform well during US stagflationary periods, the rising risk of a "stagflation-like" scenario in the US economy presents a potential upside for gold.
Second, the trend of weakening US dollar credibility is expected to persist, with "US debt concerns" likely contributing to a risk premium. Data from the World Gold Council indicates that since the Russia-Ukraine conflict, "de-dollarization" trends have fueled continued central bank gold purchases globally, with average annual net purchases exceeding 1,000 tonnes from 2022 to 2024, and remaining high at 863 tonnes in 2025. This trend is fundamentally driven by growing market concerns regarding US debt issues, frequent foreign interventions, and domestic operational mechanisms, and is expected to continue. Historically, gold prices have risen by an average of 4.4% and 11% in the six months following increases in the US debt ceiling and breaches of that ceiling, respectively. The current significantly weakened fiscal constraint effect of the debt ceiling, coupled with an expected cycle of repeated increases and breaches, is likely to support sustained gold price increases. Comparing the degree of gold's "overperformance" relative to US debt levels during periods of dollar weakening post-financial crisis, analysis suggests a reasonable gold price target above $5,000 per ounce. The combined effect of a weaker US dollar, accommodative liquidity, and safe-haven demand could potentially drive prices toward $6,000 per ounce within the year.
Following historical Middle East conflicts, the CITIC Gold Index has shown limited short-term gains but has achieved an average six-month increase of 35%. During periods where multiple positive factors for gold aligned, the average gain reached 60%. The performance of gold equities relative to the gold price itself has varied, with upward or downward divergences heavily influenced by starting valuation and price levels. For instance, following the 2008 and 2014 Gaza conflicts, gold price changes were +6.5% and -9.3% respectively over six months, yet the CITIC Gold Index surged +136% and +58%, primarily due to low initial valuations and stock price levels.
Quantitatively, following a short-term correction in the gold sector since early February, stock price levels have moved significantly away from historical extremes, while valuation advantages have become even more pronounced. Leading companies' projected 2026 P/E ratios have fallen to a historically low range of 15-20x, highlighting substantial safety margins. Qualitatively, whereas gold stock peaks historically preceded gold price peaks by 6-10 months, the pattern since 2020—especially since 2025—has shown a high degree of synchronicity between stock and gold price highs, a trend repeatedly validated amid frequent unexpected gold price rallies. As gold prices are expected to reach new highs this year, new peaks for gold sector equities are also anticipated.
Risk factors include unexpected developments in the Middle East situation; a sustained weakening of expectations for Federal Reserve rate cuts; lower-than-expected production growth from domestic gold mining companies; higher-than-expected cost increases for domestic gold miners; operational risks associated with overseas assets of domestic gold mining firms; and risks related to mine safety production and environmental compliance.
In summary, while war-related factors can amplify short-term gold price volatility, the medium-term trend has historically depended on US dollar credibility and liquidity conditions. For the current conflict, the continuation of accommodative liquidity and a weakening US dollar trend are expected to continue driving gold prices higher. Historical advantages in valuation or stock price levels have enhanced the gold sector's upside potential. Currently, with leading companies' P/E ratios at historical lows of 15-20x, and considering the recent high synchronicity between stock price peaks and gold price peaks, there is optimism that new highs in gold prices will propel the sector's equities to new record levels.
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