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It is an old market saying, but it has never felt more apt: when people are worried about the future, they buy gold — when they are worried about the present, they sell it.
While the Iran war has raised longer-term concerns over energy security and global stability, the immediate fallout, in the form of surging oil prices and renewed inflation fears, has forced investors to prioritise liquidity and higher-yielding assets over metals.
Gold hit an all-time high of $5,602 (€4,873) at the end of January and looked to be heading higher still in early March, but has since dropped nearly 25% to a low of $4,100 (€3,567), trading around $4,500 (€3,915) at the time of writing.
The decline marks a dramatic pullback from gold’s extraordinary performance last year.
In 2025, the metal delivered one of its best annual gains in decades, rising more than 60% to record levels as central banks accumulated reserves and investors sought protection amid economic uncertainty.
The drop in 2026 has triggered a swift unwinding of leveraged positions in futures and exchange-traded funds which were riding last year’s tremendous rise.
This sharp reversal defies the traditional role of the metal as a refuge during geopolitical turmoil, with a stronger US dollar and rising bond yields proving far more influential.
Macroeconomic forces override safe-haven appeal
Rising US Treasury yields and a firmer US dollar have been the dominant headwinds for precious metals.
Higher oil prices stemming from the Iran war have lifted inflation expectations, prompting markets to price in fewer Federal Reserve rate cuts or even the possibility of tighter policy for longer, including potential hikes that were previously unexpected.
This has increased the opportunity cost of holding non-yielding gold, while the US dollar’s strength has made it more expensive for international buyers.
The result has been a classic “flight to liquidity” rather than the expected flight to quality risk assets, as leveraged traders facing margin calls accelerated the sell-off.
The correction for metals has been one of the sharpest in recent memory.
Silver shares in gold’s downturn
Silver, which often amplifies gold’s moves, followed with an even bigger drop.
The white metal reached an all time high of $121 just one day after gold, on 29 January, but it has since dropped roughly 50% to as low as $61.
At the time of writing, it is trading at around $70.
Silver enjoyed an even more spectacular rally than gold in 2025, surging roughly 145% thanks to robust industrial demand from solar panels, electronics and electric vehicles, combined with investment buying.
In 2026, however, it has also declined sharply amid the same pressures of US dollar strength and higher yields, although its industrial fundamentals continue to offer longer-term support.
