When news broke of the bombing of Iran, a lot of investors were watching gold and waiting for it to shoot higher. That’s what gold is supposed to do during a conflict, right? When fear spikes and uncertainty spreads, gold has always been the classic safe haven. So when it didn’t rally the way people expected, some of those investors panicked and sold.
I did the opposite. I bought more.
Here’s the thing: gold wasn’t broken. It wasn’t failing as a safe haven. It was doing exactly what it should have done given the full picture. The problem wasn’t gold’s behaviour. It was that most people were only looking at half the story.
Gold’s Tug of War
Right now, gold is being pulled in two opposite directions at the same time.
On one side, you have the safe haven force. Fear is rising, uncertainty is real, and investors are naturally looking for somewhere to protect their wealth. That demand pushes gold higher. We’ve seen this dynamic play out time and again: the dot-com crash in the late 1990s, the global financial crisis in 2008 and 2009, COVID in 2020, Russia invading Ukraine in 2022. Every time stocks wobbled and fear rose, gold moved up. That relationship isn’t new. Gold has played this role for thousands of years, precisely because it’s not dependent on any single government or country.
On the other side, there’s an opposing force. One that’s temporary, but strong enough to offset the first.
The Force Most People Are Missing: Interest Rates
When oil prices rise sharply, as they did during the Iran tensions, they threaten to push inflation higher. Higher expected inflation leads markets to price in higher interest rates. And higher interest rates are where gold runs into trouble.
Gold doesn’t pay interest. It doesn’t pay dividends. It just sits there. So when yields on cash or bonds start to rise, holding gold carries a higher opportunity cost. Every pound you have in gold is a pound that isn’t earning those higher rates elsewhere. When that trade-off becomes more attractive, some investors shift out of gold and into yield-bearing assets instead.
That’s not a new dynamic either. Anytime bond yields move higher, gold tends to feel the pressure. There’s nothing mysterious about it.
During the Middle East tensions, rising oil prices fuelled inflation fears, which drove up expected interest rates, which pushed some investors out of gold. That selling pressure was directly offsetting the safe haven demand flowing in. The two forces were pulling against each other in real time, and for a while, the second one was winning.
Why I Saw This as an Opportunity
The misunderstanding created by gold’s muted reaction was, in my view, exactly the opportunity informed investors could take advantage of.
The safe haven story for gold had never changed. It was simply being temporarily overshadowed by a news-driven, rate-fear-driven force. Once that pressure eases, which it will, the safe haven demand that has been building doesn’t disappear. It reasserts itself.
So instead of asking “why isn’t gold going up?”, the better question is: what forces are acting on gold right now, and how do I use that to my position myself correctly?
Reacting to short-term price moves and news flow is how investors end up selling at exactly the wrong moment. Understanding the mechanics behind those moves is how you do the opposite.
Gold is still a safe haven. That hasn’t changed, and it won’t. Once you see the full picture, investing in it with clarity becomes a lot easier.
