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What the Heck's Wrong With Gold? |
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Why isn't gold going through the roof?... J.P. Morgan's timeless wisdom… For decades, one type of investment was reserved for the ultra-wealthy. Then Trump signed Executive Order 14330 - and opened it to everyone. Now you can get into this boom for less than $20. See what changed >>
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Dear reader, |
We are told gold is the safe haven par excellence. |
We are told gold is the safe haven against war, against geopolitical tumult and all manner of calamity? |
Yet here is a question: |
Why has gold absorbed such a mighty trouncing since the assault upon Iran commenced on Feb. 28? |
Should not gold have leapt to extravagant heights? Yet sit down with the facts: |
On Mar. 2 gold closed trading as high as $5,405. By March 23 gold retreated beneath $4,100, to $4,093 — a peak to trough tumble of some 25%. |
It represents gold's mightiest plummet in over 40 years. |
One of the Most Striking Departures From Historical Patterns |
The metal has since staged a counterattack, approaching $4,600 the ounce. Yet the greater point stands. |
Gold has proven less safe haven… and more abandoned ship. |
Thus Intellectia AI informs us that: |
Gold's behavior during the 2026 Iran war represents one of the most striking departures from historical patterns. Traditionally, geopolitical crises have sent investors flocking to gold as a store of value immune to counterparty risks and currency devaluations. Yet this time, gold has moved in the opposite direction, declining sharply even as oil prices surged and equity markets trembled… |
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Again, we must ask why. |
Gold's Become a Speculative Asset |
The answer — at least to these two eyes — is that gold's recent successes have transformed it from safe haven to speculative asset. |
And speculative assets often endure heavy weather poorly. Investors heave these top-heavy items overboard when the winds whip, when the seas toss and the vessel rocks. |
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Once again, Intellectual AI: |
Gold's surge to over $5,000 per ounce had attracted significant speculative interest, with many investors using leverage to amplify their exposure. |
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When the Iran war escalated and volatility spiked, these overleveraged positions became vulnerable to margin calls, forcing liquidations that drove prices lower. This dynamic has been exacerbated by algorithmic trading systems that automatically sell when prices breach certain technical levels… |
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The psychological dynamics driving gold's decline are as important as fundamental factors. The Iran war has created acute panic that leads to indiscriminate selling as investors rush to raise cash and reduce risk. This "risk-off" environment has benefited the dollar and Treasuries while hurting gold… |
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This phenomenon has been particularly pronounced in gold due to the high degree of leverage employed by many market participants. |
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In Today's Crazy World, the Dollar Is Somehow Safer Than Gold |
Meantime, gold confronts a strengthening dollar: |
The primary driver of gold's decline has been the extraordinary strength of the U.S. dollar, which has surged as investors seek liquidity and safety in the world's reserve currency. The dollar's rally has created a headwind for gold that has overwhelmed safe-haven demand. |
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It is true. The United States dollar index has vaulted some 3% since the conflict's onset. |
We are told that global investors are fleeing for the safety and stability of the world's primary reserve currency. |
I would prefer the safety and stability of gold — that is, of physical gold. |
The severe swings you observe in the listed gold price is largely symptomatic of the "paper gold" market. |
There, paper gold ounces exceed physical gold ounces by as many as 100:1. |
Yet I let it pass for now. |
The Specter of Higher Interest Rates Bodes Poorly for Gold |
Meantime, investors fear that elevated oil prices may induce the Federal Reserve to elevate interest rates. |
And elevated interest rates, as a rule — as a rule — portend poorly for gold. |
That is because gold offers no juice, no yield. Assets such as United States Treasuries do offer yield. |
And so investors flee from gold in pursuit of yield. |
Again, Intellectia AI: |
Federal Reserve policy has played a crucial role in gold's decline, with shifting expectations about interest rates creating significant headwinds. The Iran war has complicated the Fed's policy calculus, with surging oil prices threatening to reignite inflation even as economic growth slows. |
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Higher interest rates are kryptonite for gold, increasing the opportunity cost of holding the metal while making yield-bearing assets relatively more attractive. The market's repricing of Fed expectations has been particularly damaging for gold. |
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Gold Sailed Into the "Perfect Storm" |
Adding, perhaps, to gold's tribulations is an emerging liquidity crisis in the private credit markets. |
Though that, as is said, is a story for another day. |
In summary, here is Mr. Ole Hansen, Saxo Bank's Head of Commodity Strategy: |
Gold and silver remain under considerable pressure as the Middle East war continues to trigger a broad macroeconomic shock across global markets, forcing investors to reprice inflation, rates, growth, and liquidity conditions simultaneously. |
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After many months of strong outperformance, both metals have become vulnerable, not because their strategic case has fundamentally changed, but because they had become crowded longs at a time when investors suddenly needed liquidity. |
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Thus gold has confronted a "perfect storm" of sorts. |
Meantime, commentators have noted that investors have been flocking into oil. |
Thus the commodity that may have previously fetched investor money — gold — is temporarily seduced by oil. |
Yet I suspect that gold's perfect storm will clear on through. It will shake out the "weak hands" who presently maintain soft grasp upon the metal. |
These toe-dippers, these dabblers lack all attachment to gold's extended stability. |
Gold Takes the Long View |
Soon or late… upon a sturdier foundation gold will shine once again in radiance… and reassume its place in the first rank of assets. |
After all, the identical forces that had pushed gold ahead — fiscal unsustainability, wild deficits and rocketing debt — remain riveted in place. |
Thus I hazard the case for gold will only build with time. |
Yet I recognize that gold's short-term case is not gold's long-term case. |
Gold does not concern itself with the flitting fancies, the wandering whims, of the moment. |
Gold instead takes the view sub specie aeternitatis. That is, gold adopts the view from the aspect of eternity. |
And from the aspect of eternity, the United States dollar is but a fleeting transience. |
Gold is eternal. |
Brian Maher |
for Freedom Financial News |
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