Gold Slides 11% as Iran War Fuels Rate Fears Over Safe-Haven Bids

Spot gold（XAUUSD） fell 1.7% to $4,413.32 an ounce on Monday during Asian trade. This continued a terrible run in which prices have dropped 11% in just one week, which is strange for an asset that should do well in times of war. 

Even more, gold futures fell, dropping 3.5% to $4,448.46/oz. Spot prices hit a low of $4,320.19 during the session before slightly rising. After gold, silver and platinum both went down, by 0.4% and 0.6%, respectively.

The reason isn't a lack of conflict in the world's politics. The war between the U.S. and Israel over Iran has now been going on for four weeks in a row. Over the weekend, Trump gave Tehran 48 hours to reopen the Strait of Hormuz or else important energy infrastructure would be destroyed. 

Iran responded by saying they would close the strait completely and attack water and energy infrastructure across the Gulf. By any standard, this is the most dangerous place on Earth to be. That's not how Gold acts.

Why the Safe-Haven Trade Has Broken Down

Inflation, especially what a long-lasting oil shock is doing to the way central banks around the world think, is what is hurting gold.

Because of the conflict in Iran, the price of Brent crude oil has stayed above $110 a barrel. This has caused cost-push inflation, which is pushing major central banks to become more "hawkish." This directly competes with gold's appeal as an asset that doesn't pay any interest.

Following hints last week, both the European Central Bank and the Bank of England said they might raise interest rates this year. For the second meeting in a row, the Federal Reserve kept interest rates the same.

However, markets have been steadily pricing out hopes for cuts in 2026. This change makes instruments with yields, like bonds, structurally more appealing than bullion.

In a Monday client note, OCBC analysts said, "The market is trading less on geopolitical hedging flows and more on fears that stiffer inflation could lead to a more hawkish central bank stance."

Since the war started, the dollar has gotten stronger by almost 2%, which adds a second layer of pressure. A stronger dollar makes gold more expensive for buyers around the world, which lowers demand even more.

The Fed's messages make things worse. The CME FedWatch Tool shows that rates will likely stay the same or go up through December. With this in mind, the potential cost of holding gold with no yield has never been higher than it is now, when inflation is rising quickly.

What the Long-Term Bull Case Still Looks Like

Analysts at OCBC were careful to point out that gold's long-term structural forces are still in place. The desire for gold from central banks has not changed. This is especially true for institutions in emerging markets that are moving their dollar reserves to other assets.

If the war with Iran ends and oil prices go back down, the fear trade about rising inflation rates would end. This could bring a lot of pent-up demand for safe haven assets back into bullion.

$4,320/oz, which held as midday support Monday, is the important level to keep an eye on. A break below that level that lasts for a long time gives up a lot of technical downside. To get the rising trend going again, gold needs to get back to $4,500, a level it hasn't been able to hold for almost two weeks.

Gold is not doing well now and that is because of interest rates. It looks like the problems with Iran are affecting gold too.. Until things with the central banks get better or the problem with Iran gets a lot worse gold will probably keep going down. 

The main reason to buy gold is still an one it is just that Now it is hard to make money from gold because of what is happening in the world. Gold is still an investment in the long term but, for now it is hard to make it work.