At the time of writing, gold and silver are sharply lower again. This, despite escalating conflict in the Middle East, rising oil prices and renewed volatility across global markets.
In other words, the environment appears, at first glance, exactly the sort in which gold should be performing well. This is frustrating many investors. The traditional “safe haven” mantra does not seem to be working. Geopolitical risk is rising, markets are unsettled, and still gold is under pressure.
The question, then, is not simply what is happening, but why.
Part of the answer lies in what has followed the escalation with Iran. As oil prices have risen above $100 per barrel, energy-importing economies have been forced into a scramble for dollars. Higher energy costs require immediate funding, and that funding is overwhelmingly dollar-based.
At the same time, currencies have weakened and U.S. yields have moved higher, increasing the opportunity cost of holding non-yielding assets such as gold. The result is a tightening liquidity environment, in which access to dollars becomes more important than holding defensive assets.
In that context, gold is not being rejected. It is being used.
This helps explain why gold has struggled to respond to geopolitical stress in the way many would expect. Yet, despite recent price action, the longer-term case remains largely unchanged. Major institutions, including HSBC, continue to view gold as a key portfolio diversifier, particularly in a world where traditional asset correlations are rising and macroeconomic uncertainty persists.
Jan Skoyles discusses all this in more detail in today’s video, including why gold is behaving this way, what is driving the current correction, and what it may mean for the next phase of the market.
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