Gold has lost nearly $1,000 per ounce since military strikes by the United States and Israel on Iran pushed prices above $5,000. As of March 24, the precious metal was trading around $4,300 per ounce.
The dramatic decline directly challenges the metal's traditional reputation as a reliable safe-haven asset during times of geopolitical crisis. Experts warn that treating armed conflict as an automatic catalyst for gold is a flawed trading strategy.
The Real Driver Behind Pricing
Chen Hongbin (陳洪斌), chief economist at Springs Fund, recently told Chinese state broadcaster CCTV that war is actually a weak variable in pricing. He noted that geopolitical risks carry very low weight and have notoriously short impact windows.
Instead, Chen argued that the fundamental force behind gold's multiyear rally from $1,600 to over $5,500 was the global expansion of money supply. Major active currencies surged from approximately $4 trillion in 2000 to $52 trillion by early 2026.
Unrestrained money printing by governments worldwide has systematically eroded the purchasing power of fiat currencies over the past two decades. This continuous devaluation is the essential reason gold has become progressively more valuable over time.
Why This Conflict Hits Differently
The current war is unique because it is being fought in the Persian Gulf, the central artery of global light and medium crude supply. This specific disruption triggers economic consequences that directly undercut gold's usual momentum.
While the region accounts for a significant portion of conventional global shipments, its effective share of quality-adjusted light crude approaches 90 percent. Buyers have almost nowhere else to source these vital grades on the open market.
This supply shutdown has pushed crude prices sharply higher, feeding into broader inflation and prompting central banks to lean toward tighter monetary policy. Looser monetary conditions traditionally lift gold, but sudden tightening inevitably forces the metal lower.
Fiscal Strain And Liquidations
A second source of intense selling pressure comes directly from Gulf states facing immediate fiscal stress due to halted oil exports. To cover domestic shortfalls, these nations are rapidly drawing down their sovereign wealth funds.
These massive funds primarily hold U.S. Treasuries and gold, and both liquid assets are currently being sold off at scale. Liquidating Treasuries pushes long-term yields higher, creating an effective tightening of financial conditions that further headwinds gold.
The direct sale of physical gold reserves by these sovereign entities also depresses market prices in the near term. The Federal Reserve's reluctance to cut interest rates before year-end reinforces this unambiguously negative environment for the metal.
Long-Term Bull Case Intact
Despite this severe short-term selloff, Chen maintains that gold's structural bull market remains intact over a longer five- to ten-year horizon. He believes the underlying global money supply will inevitably continue its rapid, unchecked expansion.
Because fiat currencies broke their link to gold, printing money remains the fastest shortcut for societies facing structural economic problems. Over a sufficiently long timeline, this persistent systemic flaw makes it difficult for gold prices not to rise.
However, experts caution that there is rarely a bull market for any asset class when oil prices remain above $100 per barrel. The duration of the Gulf conflict will ultimately determine whether gold's current steep correction deepens or stabilizes. （Related： Reversing Course: Taiwan Eyes Nuclear Restart After Costly Decade-Long Phaseout ｜ Latest ）
