Gold No Longer Safe? Iran War Changes Everything, Investors Trapped

Gold prices began to recover after a bruising session on Monday. However, gold has yet to show its shine amid the ongoing war.

According to Refinitiv, gold prices closed at US$4,405.77 per troy ounce on Monday (23/3/2026), down 1.82%.

This weakness extended gold’s suffering, weakening by 15.13% over nine consecutive days. Yesterday’s closing price also marked the lowest level since 2 January 2026, or more than two months ago.

Gold prices during yesterday’s trading even touched US$4,099 per troy ounce.

Gold prices started to improve today. On Tuesday (24/3/2026) at 06:36 WIB, gold was traded at US$4,441.52 per troy ounce, surging 0.81%.

“The sharp sell-off on Monday is a continuation of the massive liquidation action that has occurred in recent sessions, primarily driven by expectations of interest rate hikes,” said David Meger, director of metals trading at High Ridge Futures, quoted from Reuters.

Gold prices strengthened dramatically following a post by US President Donald Trump on Truth Social, which triggered a broad rebound across various markets from metals and energy to stocks.

“Volatility is likely to continue,” Meger added.

The rise in energy prices due to the recent Iran war has increased expectations that interest rates will remain higher for a longer period.

Gold, although known as a hedge against inflation and a safe-haven asset, is struggling to gain traction because high interest rates increase the opportunity cost of holding a metal that yields no return.

Donald Trump stated that he had ordered a five-day delay on the attacks he had previously threatened against Iran’s power plants, and that the United States was engaging in talks with Tehran to end the US-Israel war against Iran.

However, Iran’s Parliament Speaker Mohammad Baqer Qalibaf, who is said to be the figure representing Iran in contacts with the US, stated via social media that no talks had taken place.

Following Trump’s statement, oil prices plummeted and the US dollar weakened. A weaker dollar makes gold, priced in dollars, more affordable for holders of other currencies.

What’s Happening with Gold?

Gold has long been known as a protective asset during crises. However, major changes since 2022 have made the old logic no longer fully applicable.

Historically, gold tends to strengthen when inflation rises, interest rates fall, or the US dollar weakens. In such conditions, the precious metal becomes investors’ top choice as both a hedge and a safe haven.

However, that dynamic changed drastically since October 2022. At that time, Western countries froze around US$300 billion in Russian assets following the invasion of Ukraine. This event became a turning point in how countries view gold.

Since then, countries with trade surpluses, especially China, have begun to see gold as the safest reserve asset. The reason is simple: physical gold cannot be unilaterally seized by other countries.

As a result, gold accumulation by central banks, particularly China, has surged to unprecedented levels. This phenomenon, combined with the increasingly fragile fiscal conditions of Western countries, has driven gold prices to record highs.

However, on the other hand, this change has also shifted the drivers of gold prices.

Now, gold no longer moves solely based on global risk sentiment.

Why Isn’t Gold Rising During the War?

This structural change explains the phenomenon that has confused many investors. Gold is not strengthening amid the Iran conflict.

In the old theory, geopolitical conflicts should drive gold prices up. But now, the more dominant factor is the ability of surplus countries to buy gold.

The problem is that gold reserve accumulation depends on trade surpluses. And surpluses can only occur if global economic and trade activities run smoothly.

This is where the crucial role of the Strait of Hormuz comes in. If this vital energy route is disrupted, global trade activity slows, surpluses in countries like China shrink, and the ability to buy gold decreases accordingly.

Ironically, events that should drive gold prices up instead trigger weakness.

In addition to macro factors, pressure also comes from retail investors. Many investors hold gold through ETFs (exchange-traded funds).

When prices start to weaken, investors sell. This leads to fund outflows that further pressure prices.

Geopolitics No Longer Supports Prices

Since late February, when tensions escalated due to US-Israel attacks on Iran, gold prices have fallen more than 15%. This is a significant reversal from previous patterns, where geopolitical uncertainty usually boosted gold demand.

Instead of being a safe haven, gold is now reacting negatively to the macro environment formed by these geopolitical developments.

Gold is behaving like a risky asset, falling along with stocks when volatility increases.

One of the main factors behind this decline is the strengthening of the US dollar. Rising oil prices increase global demand for the dollar, as energy is traded in USD. This pushes the dollar up and pressures gold prices.

At the same time, Jerome Powell signalled a more hawkish stance from the Federal Reserve, warning that inflation could rise again. As a result, market expectations for an interest rate cut in May plunged sharply from 60% to just 16%.

Higher interest rates reduce the appeal of non-yielding assets like gold, accelerating sell-offs.

Nevertheless, this does not mean gold’s attractiveness has vanished.

The traditional thesis remains relevant, especially amid the fiscal conditions of Western countries that are be