When the United States and Israel launched attacks on Iran on February 28, investors held their breath, expecting the usual scenario: gold surging upward as a shield against the chaos. And indeed, for a few hours, the metal climbed sharply. But the story ended there. In the following days, a wave of selling dragged the price down by more than 6%, and since then, the metal has fluctuated as the conflict escalated and the Strait of Hormuz remained blocked. The ultimate safe haven isn't working as such. Why?
The dollar steals the show
One of the main reasons has been the strength of the US dollar. In times of global crisis, the greenback also acts as a safe-haven asset, and on this occasion, many investors have opted for it instead of gold. This, in turn, makes the metal more expensive for those using other currencies, reducing international demand. Gold, at its core, is an anti-dollar asset: it shines when the American currency weakens, not when it strengthens.
Oil Poisons Everything
The war has driven up crude oil prices, and that completely changes the landscape. The rise in energy prices has introduced an inflationary component that has altered monetary policy expectations. The oil price surge triggered by the crisis in the Middle East is reigniting inflationary fears, leading investors to revise their expectations of central banks. And that's where the third factor comes in.
High Interest Rates Kill Gold
When interest rates or government bond yields rise, investors find attractive alternatives to gold. Unlike bonds, the metal doesn't pay interest or dividends, so it loses relative appeal. The combination of a strong dollar and rising yields is usually particularly negative, as both factors increase the opportunity cost of holding gold in a portfolio.
A Safe Haven with Conditions
Academic evidence shows that gold only acts as a strong safe haven against purely macroeconomic and geopolitical shocks, not commodity shocks, which is exactly the type of crisis the market is facing today. Furthermore, when the conflict erupted, many institutional investors had already accumulated considerable gold positions and opted to take profits at the first rally, rather than increase their exposure.
Net purchases by central banks fell by more than 70% in January 2026 compared to the same month of the previous year, according to data from the World Gold Council. Some countries are selling their reserves to finance defense spending.
Gold is not dead as a safe haven. But this war has reminded the market that its protective powers come with a catch.
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