The armed conflict between the US - Israel and Iran erupted in late February 2026, creating one of the most unusual developments in the gold market in decades. Previously, gold was considered a typical 'safe-haven' asset, often rising sharply when geopolitical tensions escalated due to concerns about inflation, supply chain disruptions, and global instability. As soon as the US - Israel conducted large airstrikes on Iran, gold initially reacted by soaring above $5,400/ounce, increasing nearly 2-3% in the first few days due to safe-haven inflows. However, just a few weeks later, this precious metal plummeted sharply, dropping more than 10-15% from its recent peak, at one point losing up to 13-18% of its value, becoming one of the worst weeks of decline since 2008.

The main reason why gold is 'betraying' its traditional role lies in the dominance of the USD and US bond yields. When conflicts break out, investors rush to the USD for immediate liquidity, pushing the USD Index up by about 2%. The strengthening currency has made gold – which is priced in USD – more expensive for foreign investors, leading to selling pressure. Additionally, concerns about inflation due to soaring oil prices (exceeding 100-112 USD/barrel) have led the market to expect that the Fed may maintain higher interest rates or tighten monetary policy, reducing the appeal of non-yielding gold. Many gold ETFs have reported outflows, while investors sell gold to offset losses from stocks and other risk assets that are being heavily sold.

Moreover, the market quickly priced in a short-term war scenario. Signals from President Trump regarding negotiations for a ceasefire and limiting the scale of the conflict have made investors believe that geopolitical risks will not last long, reducing the safe-haven premium on gold. However, if the conflict escalates, affecting the Strait of Hormuz or long-term oil supply, gold still has strong recovery potential due to its role as a hedge against inflation and instability. Central banks, especially China, continue to buy gold as a strategic 'insurance.'

In summary, the Iran conflict has exposed the complexities of the modern gold market: it is not only dependent on geopolitics but also influenced by the flow of USD, monetary policy, and short-term liquidity sentiment. For Vietnamese investors, this is an important lesson about diversifying portfolios and not viewing gold as an absolute 'shield' in every crisis scenario. Domestic gold prices also fluctuate significantly according to global trends, requiring close monitoring of Middle Eastern developments in the near future. #GOLD_UPDATE