Why aren't gold prices rising, despite Iran war uncertainty?
It's the riddle confounding investors around the globe. The United States and Israel are at war with Iran. The Strait of Hormuz—through which nearly 20% of the world's oil flows—is effectively closed. Oil prices have surged past $100 a barrel. Inflation fears are flaring. And yet, gold? It's hovering around $5,000 an ounce, basically going nowhere .
By every historical script, gold should be soaring. But it isn't. Here's what's really going on.
📜 The Script That Got Flipped
When the U.S. and Israel struck Iran on February 28, gold did exactly what everyone expected—briefly. Prices jumped from $5,296 to $5,423 per ounce in a matter of days . Then something strange happened. By March 3, gold had dropped more than 6%, even as bombs continued to fall .
Two weeks into the conflict, with the Strait of Hormuz paralyzed and oil holding above $100, gold is trading in a tight $5,050–$5,200 range. Sideways. Unimpressed .
"The gold market reflects a balancing act between safe-haven demand on heightened geopolitical uncertainty and bearish pressures from inflation," explains Jim Wyckoff, senior analyst at Kitco Metals. His blunt assessment: "I think the bulls have just run out of gas" .
🔄 The Great Unwind: Why Gold Isn't Following the Playbook
1. The Fed's Impossible Math
Here's the heart of the matter: before the Iran conflict escalated, markets had priced in at least two interest rate cuts from the Federal Reserve in 2026 . Those expectations were a major reason gold had already rallied more than 70% in 2025 .
Then oil crossed $100 a barrel.
Higher energy prices mean higher inflation. And higher inflation means the Fed can't cut rates—at least not anytime soon. The CME FedWatch tool now shows traders expect just 25 basis points of easing for the entire year, a dramatic shift from just weeks ago .
"Higher oil means higher inflation, and central banks won't rush cuts like they planned six months ago," says Bob Haberkorn, senior market strategist at RJO Futures .
For gold, which pays no interest, this is a body blow. Why hold a non-yielding asset when Treasury yields are attractive and the dollar is strengthening?
2. The Dollar's Safe-Haven Crown
In a twist that's frustrating gold bulls, the U.S. dollar—not gold—has emerged as the preferred safe haven in this crisis .
The logic is simple: oil is priced in dollars. When oil prices surge, global demand for dollars surges with it. The U.S. Dollar Index recently hit a more-than-3.5-month high, and a stronger dollar makes gold more expensive for holders of other currencies .
Vandana Bharti, head of commodity research at SMC Global Securities, points out another dynamic: traders shifted toward "higher-beta trades" like crude oil, which became the primary beneficiary of the conflict .
"Crude prices surged 40–50%, increasing global demand for the U.S. dollar since oil imports are largely settled in dollars, thereby strengthening the dollar index and limiting gold's upside," Bharti explains .
3. The "Crowded Trade" Problem
Gold had an extraordinary run in 2025. It delivered dazzling returns of more than 70%, outperforming equities, fixed income, and real estate . That means a lot of investors were sitting on substantial profits when the war began.
"When a market cannot rally on fresh, bullish fundamental news, then that's a sign the bulls are exhausted," Wyckoff observes . In plain English: the smart money may have already taken profits and moved on.
Exchange-traded funds reduced their gold weightings, and central bank purchases fell by nearly 25% in the last quarter of 2025 . Some investors even turned to holding cash during the uncertainty .
4. Forced Liquidations
There's another, more technical reason for gold's struggles: margin calls.
When markets get rattled and volatility spikes, investors often need to raise cash quickly. That means selling their most liquid, winning positions—even gold . The war premium got priced in fast, then unwound even faster as traders scrambled to cover losses elsewhere .
5. Oil: The Double-Edged Sword
This might be the cruelest irony for gold investors. Yes, the war has driven oil prices higher. Yes, that should theoretically boost gold as an inflation hedge. But the mechanism matters.
Rising oil prices exacerbate inflation concerns, which keeps the Fed hawkish, which strengthens the dollar, which pressures gold . It's a chain reaction that has, so far, worked against the yellow metal.
"Gold's bull case rests on low rates, but $100 oil flips that script," notes Rhona O'Connell, analyst at StoneX .
🏦 Physical vs. Paper: A Tale of Two Markets
Here's an important distinction that offers some hope for gold believers: the paper market and the physical market are telling different stories.
"This is what paper gold does," notes an analysis from GoldSilver.com. "It trades like a risk asset when risk assets crack. Physical is a different story" .
Central banks continue to view gold as a critical reserve asset. Major asset managers see it as a rare source of diversification against structural risks facing both equities and bonds . Neils Christensen, editor at Kitco, puts it this way:
"In other words, the current weakness in gold may be less about deteriorating fundamentals and more about timing. Short-term frustration may dominate the headlines today. But the forces building beneath the surface suggest gold's longer-term rise is far from over" .
🔮 What Comes Next?
So where does gold go from here?
The Bull Case
The fundamental argument for gold hasn't disappeared—it's just been temporarily overshadowed. Consider:
The U.S. economy was already slowing before the conflict, with Q4 GDP revised down to just 0.7% annualized
Global government debt is at historic levels, and rising borrowing costs are pressuring balance sheets
Stagflation—slowing growth with sticky inflation—has historically been one of gold's strongest environments
The Iran conflict shows no signs of de-escalation, and surprising developments could still emerge
Analysts at JPMorgan project gold to average $5,530 in Q2 and reach $6,300 by year-end, citing the war and its economic consequences as key drivers.
The Bear Case
But the risks are real. Daniel Pavilonis, senior commodity broker at RJO Futures, warns that gold could retest much lower levels if the conflict takes a certain turn.
"Gold has a possibility of going down to $4,200 if the situation deteriorates further," Pavilonis cautions . His reasoning: if the conflict escalates and oil prices continue rising, interest rates could climb higher, putting more pressure on gold .
Pavilonis also points to a fascinating geopolitical angle: Iran's attacks on Gulf states like the UAE may be designed to force those nations to sell U.S. assets—including Treasuries and stocks—to fund their own security, creating selling pressure across multiple markets .
The Middle Path
Most analysts expect continued choppy, sideways trading in the near term . Wednesday's Fed decision will be crucial—if the "dot plot" shows policymakers expect only one rate cut this year, gold could face renewed pressure .
But if tensions continue escalating and oil prices remain elevated, gold's safe-haven attribute should eventually reassert itself . The $5,000 level may simply be a consolidation point before the next leg higher.