THE gold price has shed more than 15% since the outbreak of the Iran war, unsettling investors who had long regarded the precious metal as a reliable refuge in times of geopolitical stress.
Bullion had held firm in the opening days of the Middle East conflict, even as equities and bonds came under pressure. But it was subsequently dragged down as investors liquidated profitable positions to meet losses elsewhere, unwinding a rally that had carried prices to a record $5,594 per troy ounce in January.
In an article by the Financial Times, Rhona O’Connell of StoneX cautioned against assuming gold would behave as a safe haven, saying that it “almost invariably comes down during equities and Treasuries meltdowns, as investors cash it in to raise funds.”
Jason Turner of Berenberg said hedge funds and brokers had been selling bullion to cover margin calls in equity and bond markets. Data group Vanda estimated outflows from global gold exchange-traded funds at around $10.8bn since hostilities in the Middle East began.
The price stood at roughly $4,400 an ounce on Tuesday after US President Donald Trump signalled the conflict might end soon. Gold has fallen 16% since bombardment commenced on 28 February.
Rising interest rate expectations have compounded the pressure, with higher bond yields drawing capital away from non-yielding assets. “Gold and silver are phenomenally sensitive to interest rate expectations,” said Adrian Ash of BullionVault.
BMO analysts said gold could recover much of its losses once risk appetite returned, while some drew parallels with the eventual rebound that followed the 2008 financial crisis sell-off.
