Why gold prices are plunging amid the Iran war, despite being a supposedly safe asset
Gold prices have plunged 13% since the outbreak of war with Iran, betraying the yellow metal's reputation as a safe-haven asset.
A slew of other assets have weathered the Middle East conflict in better shape. The S&P 500 has dropped 7% since the Middle East conflict began, while the tech-heavy Nasdaq has fallen 8%. Bitcoin has declined only 2%.
"Surprise! Perhaps the most unusual move in markets during the Iran war has been the weakness of gold," Deutsche Bank Research said earlier this week.
The gold selloff owes to overlapping factors, some experts said. These factors include the high price of gold before the war, the relative attractiveness of other low-risk assets and a mixed record of living up to its safe-haven status.
At times, gold can "break free of longstanding patterns and trade to its own tune," Adam Turnquist, chief technical strategist at LPL Financial, said in a statement to ABC News on Tuesday.
The recent drop follows a months-long stretch of blockbuster performance for gold. Last year, heightened geopolitical and economic uncertainty boosted demand for gold and silver, which typically display a degree of independence from movements in stock prices.
As recently as January, gold hit an all-time high of nearly $5,600 per ounce. Even after falling to its current price of about $4,490 an ounce, the price of gold remains nearly 50% higher than where it stood a year ago.
The high-flying performance left gold vulnerable to a selloff, Campbell Harvey, a professor at Duke's Fuqua School of Business who studies commodity prices, told ABC News. Bullion, he added, typically generates modest or negative returns over the period following an all-time high.
"What's anomalous to me is the run up in the price of gold. We're talking about a decrease from that peak," Harvey said.
The expectation of an upswing in gold prices in periods of economic uncertainty is based on a proven track record, but the rule does not always hold true, some analysts said.
Decades of evidence support gold’s reputation as a safe-haven asset, according to an analysis co-authored in 2025 by Harvey. The price of gold moved higher during eight of the last 11 major stock market selloffs stretching back to the late 1980s, researchers found.
Still, Harvey said, gold can be "inconsistent as a safe haven."
Gold prices carry volatility of their own, risking losses instead of providing a security blanket. "Gold is not going to move in lockstep with every single geopolitical crisis," Harvey said.
The decline in the price of gold also stems from a simultaneous rise in Treasury bond yields, which offer investors a safe asset that, unlike gold, promises annual payouts.
The yield on a 10-year Treasury bond, or the amount paid to a bondholder annually, stands at about 4.45%, marking a nearly half-percentage point jump from a month earlier.
The rise in bond yields reflects in part an expectation the Federal Reserve will keep interest rates higher for longer in an effort to avoid war-driven price increases.
High interest rates, in turn, make gold less appealing. "Gold doesn't pay interest," Turnquist said.
Some analysts cautioned of potential volatility in gold over the coming weeks and months, but they voiced optimism about where gold prices will stand beyond then. The price of gold has climbed nearly 160% over the past five years.
"Over the long term, the holders of gold have done just fine," Harvey said.
