Why did gold fall during the US-Iran war? UBS: The safe-haven attribute has not failed; it’s just delayed in taking effect.

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Source: JL Finance

JL Finance March 25 (Editor Liu Rui) Since last year, gold has been riding a strong uptrend, repeatedly setting new record highs. However, until the end of February when the war between the U.S. and Iran began, gold suddenly lost its upward momentum and kept falling all the way down. Now it is already down more than 20% from the peak in January.

This has left many gold investors puzzled: Gold is clearly a safe-haven asset—why has its safe-haven attribute failed to work this time?

In response, the answer from UBS’s Global Wealth Management team is this: gold’s safe-haven attribute has not failed, but may take effect later than expected.

Gold’s safe-haven attribute has not failed

Local time this Monday, UBS’s Global Wealth Management team released a report, further reaffirming its bullish stance on gold. UBS analysts Wayne Gordon (Wayne Gordon) and his team said that although the gold price has recently declined, they believe investors should still hold gold as a defensive hedging instrument.

That may sound a bit strange, because during the U.S.-Iran war, gold’s price seemed to move in the opposite direction to how tense the battlefield was: whenever there were signs that the conflict was escalating, the gold price would fall accordingly—and vice versa.

This clearly goes against investors’ understanding of gold’s “safe-haven attribute.” In normal circumstances, wars should drive investors to flock to gold to seek safety.

But Gordon’s team isn’t worried.

“We don’t see this as gold’s ‘Bernanke moment’—that is, a ‘major turning point’—because we’re seeing clear differences between the current situation and the important policy turning points for central banks from several decades ago. This suggests that fundamentals have not changed significantly, and we expect strong support for the gold price based on future macro developments,” he said.

The analyst added that the team’s view of gold as an effective portfolio hedging tool has not changed, and they predict that the gold price will soon resume its rise.

Could gold’s safe-haven effect show up in the future?

UBS attributes gold’s recent decline to several factors, such as investors’ reduced confidence in Fed rate cuts and weaker market speculative momentum.

However, in Gordon’s view, if history can be used as a reference, it may be too early to take a negative view of gold’s future prospects.

He said, “For many investors, gold appears rather subdued when facing geopolitical tensions and rising price volatility, which seems to run counter to people’s intuition… However, history shows that especially in the early stages of a conflict, gold does not always go up.”

The analyst recalled that during the oil crisis in the 1970s (a period very similar to the current situation where the Iran war leads to higher oil prices), concerns about inflation in the market led to a strong uptrend in the gold price. But during the Iran-Iraq War, because macroeconomic factors offset each other, the gold price overall remained steady.

Gordon believes that in fact it is difficult to make a direct comparison of gold prices across different historical periods of geopolitical conflicts. However, one clear conclusion is that gold’s price trend is often not driven directly by the conflict itself, but by policy and the economic backdrop.

He said, “Because the market is adjusting to expectations of higher interest rates and a stronger U.S. dollar (both of which are short-term headwinds for gold price increases), gold’s value-preservation role has come under pressure in the early cycle. But this is not a failure of gold’s safe-haven performance—it’s a delay.”

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责任编辑：赵思远