The gold price continues to serve as a defensive investment against economic uncertainty and inflation, but in analysts’ view the precious metal currently looks less convincing as a classic “crisis winner” in response to specific geopolitical events. In a new commodities report, the UK research house Metals Focus argues that the market’s latest reaction to the joint US-Israeli military action against Iran once again confirms this pattern: gold initially rose noticeably, but was then unable to hold on to those gains.
At the start of the week, according to the report, the gold price briefly tested a resistance area around $5,400 per ounce as investors reacted to the escalation. By Thursday afternoon, however, gold had fallen back below $5,100 per ounce. Metals Focus calls this rapid reversal “disappointing,” but at the same time maintains a constructive outlook for the second half of the year—albeit less because of an “event spike” and more due to a broader macro and geopolitical backdrop.
Metals Focus: Geopolitical shocks rarely drive gold sustainably
The analysts’ core message is that the boost gold often receives during periods of geopolitical tension usually lasts only briefly. In their view, this applies not only to gold but generally to many markets—except for those assets whose supply, demand, or trading is directly affected by the respective event. Even in longer-lasting conflicts, they often observe a rapid onset of “investor fatigue,” causing demand for classic safe-haven investments to ease again. Metals Focus expects this pattern could become visible again in the current conflict environment involving Iran.
At the same time, the research house highlights a tail risk: given the specific constellation, things could play out differently this time. The market is therefore not only pricing in the base case of a limited conflict, but must also consider the possibility that the situation escalates and economic consequences hit far more strongly than in previous episodes.
Strait of Hormuz, energy prices and “12 nations” as escalation factors
As the main channel through which a conflict involving Iran could have a stronger impact on markets, Metals Focus cites the global energy system. The analysts point to rising risks to energy supply if the conflict affects shipping through the Strait of Hormuz. This is significant because a substantial share of global oil and gas flows passes through this bottleneck. If disruptions occur, price reactions in the oil market can be swift and severe—with potential knock-on effects on inflation expectations and risk aversion.
In addition, Metals Focus says that 12 nations have already been drawn into the conflict. This increases the risk of further regionalisation or escalation, which, in market logic, can intensify hedging demand. The analysts thus outline a scenario in which the gold price is again sought more strongly as a safety anchor—though not automatically and not without countervailing forces.
Metals Focus also points to a second important factor: there is little political support for another prolonged conflict in the Middle East. In the US in particular, the domestic political costs of a lengthy deployment are high.
Political headwinds in the US: risk ahead of the midterms
Metals Focus argues that a prolonged or out-of-control war involving Iran—close in time to the US midterm elections—would pose political risks for the Republican Party. Voters are unlikely to welcome the financial and human costs, as well as potential consequences for inflation, especially via rising oil prices. From this perspective, a base case appears plausible in which the conflict remains limited or at least must be politically contained.
For the gold price, Metals Focus derives the following: in such an environment, gold could retest the all-time highs from January, but it would likely lack the momentum for sustained, steady gains. In other words, a retest of the extremes would be conceivable in an escalating moment, but without additional, lasting drivers the market could again slip back into a volatile sideways phase.
At the same time, the door remains open for a different outcome: should clear signs of escalation emerge or oil and energy markets be noticeably disrupted, the analysts see a level of $6,000 per ounce as possible. That would be less a gradual trend and more a reaction to a significantly heightened risk situation.
Gold versus Treasuries: safe-haven competition and rising yields
Metals Focus also takes an interesting look at the role of US government bonds. The analysts see signs that, in the current situation, Treasuries are not attracting safe-haven inflows to the extent that has often been the case historically. While the US dollar has received some inflows this week, yields on the 10-year US Treasury have simultaneously risen back above 4%.
Metals Focus views the limited Treasury inflows as an additional argument that the traditional safe-haven function of US government bonds is at least being debated in the market. This could help gold in two ways: directly, because gold competes with Treasuries for defensive capital, and indirectly, because doubts about Treasuries’ role can also feed back into the dollar—and a weaker dollar is typically supportive for gold.
Beyond the specific Iran shock, Metals Focus therefore remains constructive overall on the gold price: not because every geopolitical impulse automatically triggers a lasting rally, but because the events make the broader mix of economic uncertainty and geopolitical shifts more visible. In the analysts’ view, this underlying uncertainty can create an environment in which gold can move back toward higher levels over the course of the year—even if individual crisis reactions fizzle out in the short term.
