Gold has come under notable pressure since the Iran conflict began in late February and entered its third week, despite the escalation in the Middle East that might typically bolster demand for safe-haven assets. The recent phase of hostilities intensified after the U.S. and Israel struck a key Iranian export terminal over the weekend, prompting threats of retaliation from Tehran.
At the same time, crude oil climbed above $100 per barrel during the escalation, a move that has raised concerns about potential upward pressure on global inflation. Even so, XAU/USD is down about 5% since the conflict began - an outcome that runs counter to the metal’s usual pattern of outperforming during geopolitical upheaval.
The reason for the disconnect, analysts say, is liquidity-driven selling. Bank of America analyst Lawson Winder has argued that investors have been liquidating positions in the traditional safe-haven to raise cash amid a sharp global equities selloff. "Gold has been under pressure since the Iran war began, as investors tapped the haven asset for liquidity amid a sharp global equities' selloff, leaving the bullion unable to benefit from the broader geopolitical turmoil," Winder said.
That dynamic has coincided with financial conditions that are unfavourable for non-yielding assets. Rising Treasury yields and a firmer U.S. dollar have added downward pressure on gold prices. Last week alone, the metal fell nearly 3%, and mining equities reflected similar weakness.
Mining-focused ETFs recorded meaningful weekly declines: the iShares S&P/TSX Global Gold Index ETF (TSX:XGD) dropped 6.3% for the week; the Philadelphia Gold/Silver index was down 7.1%; and the Market Access NYSE Arca Gold BUGS Index UCITS ETF (SIX:MAGB) fell 7.3%.
Despite the recent selling, proponents of gold view the pullback as an opportunity to accumulate. Colin Bosher, co-founder and CSO at Nuway Capital, said demand for gold is being driven by geopolitical uncertainty, inflation concerns and central bank reserve diversification. "Structural inflation drivers remain firmly in place - energy transition costs, supply chain reshoring, defence spending and demographic pressures. All of these factors reinforce gold's role as a long-term store of value," he added.
Even after the downturn linked to the early weeks of the Iran conflict, gold is still substantially higher year-to-date, trading about 16% above its level for the year in 2026. For market participants, the current episode highlights a tension between immediate liquidity needs during equity market stress and longer-term structural forces that support gold as a store of value.
What this means for markets:
- Short-term pressures - driven by equity market liquidation, higher yields and a stronger dollar - have outweighed the typical geopolitical premium for gold.
- Commodities such as oil have rallied in response to the conflict, raising inflationary concerns that could support gold over a longer horizon.
- Gold mining equities have experienced sharper percentage declines than the bullion itself, reflecting leverage to metal prices and market sentiment.