Lately, there’s been a lot of talk about Bitcoin (BTC USD) failing as a reliable safe-haven, since it has fallen alongside the S&P 500 and Nasdaq. But gold hasn’t been doing much better: over the three weeks of the U.S. “special operation” in Iran, the precious metal dropped more than 15%. Only Donald Trump’s comment that the U.S. and Iran are negotiating and that the conflict could end soon helped gold prices regain some momentum.
Why?
The main reason is that if the conflict eases, pressure on the global economy from high energy prices and supply chain disruptions would ease too. Central banks, including the Federal Reserve, would be less likely to raise interest rates, reducing the risk of another economic hit. If the opposite happens and regulators turn more hawkish, gold loses appeal since it does not pay interest like bonds.
Another factor supporting gold is that, at the start of the U.S.- and Israeli-led operation against Iran, there was a significant shift of liquidity from gold funds toward the energy sector. Once hopes for a resolution emerged, that flow began to reverse.
What is the problem?
Tehran has denied Trump’s claims of fruitful negotiations. More importantly, the Strait of Hormuz remains virtually closed to maritime traffic, and countries such as the United Arab Emirates and Saudi Arabia have signaled that they might be willing to enter the conflict.
If the conflict drags on, it could trigger a supply crisis, which would likely raise inflation expectations. Although central banks cannot directly resolve supply crises, they could respond by raising interest rates to contain inflation expectations.
By the way, there are already reasons for regulators to take a more restrictive stance. Inflation data in both the U.S. and the eurozone had been exceeding expectations even before the energy crisis. For example, year-over-year inflation in the eurozone rose to 1.9% in February 2026 from 1.7% in January, despite economists' expectations that it would remain unchanged. In the U.S., the producer price index for final demand surged 0.7% last month — the largest increase since last July — well above the forecast of 0.3%. Similar trends have been seen in Australia, Canada, and elsewhere.
Thus, the optimism fueled by Trump’s comments may be premature. However, over the long term, gold is still likely to outperform oil, supported by ongoing fiscal challenges, global instability, and declining confidence in fiat currencies.