Gold's Ups and Downs

Lately I’ve been asked multiple times why the price of gold fell after the start of the Iran war. When the U.S. and Israel started pounding that country in late February, many people expected gold, a classic safe-haven asset, to rally. Instead, after spiking above $5,400 per ounce, the yellow metal reversed sharply and fell below $4,200 by late March. Silver followed suit. 

Headlines warned “Gold is Crashing During a War,” and “Gold is Looking Less Glittery.” Bearish charts started circulating again, comparing the current action to the brutal 1980s bear market.

I get why people are confused. On the surface it looks like gold failed its one job. But if you’ve followed my thoughts over the years on the monetary system, fiat debasement, and the slow-motion unraveling of dollar hegemony, this short-term weakness is not a relevant headline. It’s just the flavour of the week in certain financial media. 

Let’s start with the short-term mechanics, because they explain the sell-off without invalidating the bigger picture. The Iran war triggered an oil shock. Attacks and threats around the Strait of Hormuz slashed Gulf production by at least 10 million barrels per day. Oil prices spiked, which fed inflation expectations. 

Markets quickly redrew the Federal Reserve’s likely path forward.Fewer rate cuts in 2026. Possibly tighter policy for even longer. A higher 10-year Treasury yield that pushed the U.S. dollar higher.

Suddenly, non-yielding gold looked expensive. Investors and institutions, facing liquidity needs amid uncertainty, sold gold (and other assets) to raise cash. This was a classic liquidity crunch, and it overrode traditional safe-haven buying. It was not unlike the sell-off during the 2008 financial crisis. That was short-lived. Two years later, gold had almost doubled. 

Wars usually boost gold as a hedge against chaos, but this time the accompanying inflation expectations and stronger dollar created a countervailing force. As UBS’s Mark Haefele noted, gold is ultimately a hedge against the wider economic impact of conflicts, not against the conflict itself. Morningstar and Bloomberg pieces made the same point: macro realities (dollar strength, yields, liquidity) outweigh the fear trade in the near term.

All of those forces are real. But they’re also temporary. That’s when the structural changes I’ve been writing about for years come into play, and these deeper forces are what make a repeat of the early-1980s gold crash highly unlikely.

Back then, Paul Volcker, chairman of the Federal Reserve Board,could hike rates aggressively—and did, to a peak of around 20 percent—because U.S. debt-to-GDP was only around 30%. Today it sits at roughly 120%. The government and the Fed simply cannot afford a Volcker-style rate-hike shock without blowing up the debt dynamics. As one X post put it succinctly, “High debt = no more Volcker-style rate hikes = gold wins.” 

Even more important to gold’s prospects is the slow-motion breakdown of the petrodollar system. Aaron Brown nailed it in a Bloomberg piece: the 50-year “virtuous cycle “— U.S. security guarantees for Gulf oil producers in exchange for oil priced in dollars, which get invested back into U.S. Treasuries — has been knocked off-kilter by this war.

Gulf production cuts have dried up new petrodollars. Oil-importing nations are selling Treasuries to obtain dollars and stabilize their currencies. The petrodollar loop that subsidized U.S. borrowing costs for decades is no longer functioning the way it once did.

Even before the war, 20% of global oil was being traded in non-dollar currencies. Adding fuel to the fire, Iran is now courting oil-buying nations to pay with anything but the U.S. dollar as a condition for safe passage through the Strait of Hormuz.  Every shipment of oil paid for in Euros or yuan is another little crack in the pillar of US dollar hegemony.

I’ve been saying for years that the US’s post-1971 fiat experiment was ultimately unsustainable. Nixon’s gold-window closure was the original gold heist. What we’re seeing now is the long, slow aftermath: not just central-bank gold buying and petrodollar erosion, but accelerating de-dollarization and rising geopolitical fragmentation and overall trust in the US under the current administration. 

This erosion of trust is evident in a recent move by France and purge countries. Between July 2025 and January 2026, the Banque de France sold 129 tonnes of gold that had long been stored at the New York Fed. They replaced that tonnage with gold bars bought in Europe, booking a roughly $15 billion capital gain in the process. 

All of France’s official reserves—2,437 tonnes—are now physically secured in Paris. This is not just political theatre, it’s operational prudence. It follows a clear and growing trend of repatriation and reduced reliance on U.S. custody, a trend that Germany, Poland, the Netherlands, and other countries started years ago. 

Meanwhile, China is also quietly stacking physical gold. In March 2026 alone, the People’s Bank of China added 160,000 ounces (almost 5 tonnes) to their holdings, far above the 30,000-ounce monthly additions seen in slower periods. That marks 17 consecutive months of official buying. China’s total reported reserves now stand at close to 75 million ounces (2,313.5 tonnes).

The real number is very likely much higher. You might ask why China is not disclosing its actual gold holdings. I know from my brokerage days that when you’re accumulating a position, you certainly don’t advertise the fact. Just the opposite. You don’t want others to get wind of your strategy and front-run you. Goldman Sachs believes the official figures understate China’s actual gold holdings by as much as 10 times.

These are not short-term aberrations; they are structural shifts that favor hard assets like gold over the paper promises of fiat currency.

Add in the ever-growing U.S. M2 money supply, which just hit a new all-time high of $22.7 trillion, and you have a textbook environment for fiat debasement. America’s insatiable appetite for money printing and ballooning debt gives further impetus to central banks and investors as they accumulate gold. 

A recent Economist piece likened gold to a meme stock — one that rises and falls thanks to social media hype and internet culture. 

Really?

Sure, gold can look “less glittery” for weeks or months when a crisis collides with liquidity needs and a stronger dollar. As I said, that’s exactly what happened after Israel and the U.S. launched the war against Iran.

But America’s huge debt burden, broken recycling loop, relentless money printing, and weaponization of the dollar through punitive sanctions are precisely why gold’s long-term upward trajectory remains intact.

The Iran war didn’t kill the gold bull market. The Middle East simply reminds us that safe-haven behavior sometimes takes a back seat to short-term liquidity and monetary realities. The structural tailwinds I’ve monitored for years haven’t gone away. If anything, they’re stronger than ever.

When you see bearish headlines and charts comparing 2026 to the 1980s, consider the context. Debt levels are now four times higherthan they were forty years ago. I repeat: The petrodollar loop is breaking. Central banks are repatriating gold and socking it away.Money supply keeps expanding. And — how to put this delicately? — the world no longer has faith in the dollar and in America’s role as guarantor of global security.

The gold-price dip when bombs fell on Tehran wasn’t the start of a major decline — it was a buying opportunity. The bull market in gold isn’t over. Much more likely, it’s just getting started.