Has Gold Stopped Being a Safe Asset? The True Nature of the "Reverse Spin" Triggered by the Iran Situation

Has Gold Stopped Being a Safe Asset? The True Nature of the "Reverse Spin" Triggered by the Iran Situation

"Gold in Times of Crisis"—this phrase has become somewhat of a cliché in the investment world. War, terrorism, political upheaval, financial crises. The more the world shakes, the more people flee from paper assets to gold, which is considered closer to a "real" asset. This belief has been long-standing.


However, this time, during the market turmoil caused by military conflicts involving Iran, gold did not shine as expected. It actually declined. Many people must have watched the news and wondered, "Isn't gold supposed to go up?" Why didn't the textbook reaction occur? This reveals the current market's "shape of fear" and the changing "hierarchy of safe assets."


1) Gold's decline is not because the "crisis is small"

First, it's important to note that just because gold has declined, it doesn't mean the crisis is minor. If the conflict intensifies, logistics, energy, diplomacy, and finance will all be shaken in a chain reaction. The market fears not just the "danger itself." It also prices in how the danger will ripple through economic indicators and monetary policy.


In this situation, the market was particularly aware that the "war risk" directly connects to the "risk of inflation resurgence." Especially with tensions in the Middle East, concerns over oil supply can easily drive up living costs. Since energy is behind the price of everything from gasoline to transportation, manufacturing, and food, a rise in oil prices can act as a trigger for inflation.


If inflation resurges, central banks will have no choice but to become hawkish again. This is troublesome for gold. Gold appears "attractive" when cash and bond yields are low, and there are strong concerns about currency devaluation. Conversely, when "interest rates rise" and the "dollar strengthens," the market loses reasons to hold gold.


2) The moment the main safe asset shifted from "gold" back to "dollars + U.S. Treasuries"

In times of crisis, where funds flee is not a single choice. Broadly speaking, there are three havens.

  • "Cash (especially U.S. dollars)" that can be quickly liquidated

  • "Government bonds (especially U.S. Treasuries)" with high credit and liquidity

  • "Gold" that distances itself from currency


This time, funds primarily chose the first two. When fear heightens, investors prioritize "survival" over "profit." To survive, assets that can be quickly paid, used as collateral, and traded in any market environment are strong. U.S. dollars and U.S. Treasuries meet these conditions well.


Moreover, commodities like gold and oil are often traded in "dollars." The stronger the dollar, the more expensive gold prices appear in currencies other than the dollar, dampening demand. This was a moment when "crisis = dollar buying" overpowered "crisis = gold buying."


3) "Speculative heat" and fragility caused by the prior rise

Another key factor is that gold had already risen significantly. After a sharp price increase, the market appears strong but is actually fragile. The reason is simple: the more unrealized gains accumulate, the more people want to take profits.


As prices continue to rise, two voices simultaneously echo in investors' minds.

  • "It will go up more. Don't miss out."

  • "It could crash at any moment. Don't get caught."


This state is called "overheating." In an overheated market, even without bad news, a small trigger can cause a selling avalanche. The decline in gold this time was partly due to the discomfort of "not rising despite the crisis," which ironically triggered selling. The market doesn't move solely on logic. The fact that it doesn't move as expected becomes a factor in itself.


4) Oil price rise → Inflation concerns → Rate hike expectations: A three-step disadvantage for gold

Connecting this scenario in a single line, it looks like this.

  1. Risks to maritime transport and oil-producing regions are highlighted due to Middle East tensions

  2. Supply concerns push up oil prices

  3. Rising fuel and transportation costs spread to overall prices

  4. If inflation resurges, rate cut expectations recede, and rate hike expectations strengthen

  5. Rising interest rates lead to a stronger dollar, relatively reducing the appeal of non-interest-bearing gold


This chain of events creates a "headwind despite the crisis" for gold. In other words, this market was more about the "financial policy changes triggered by geopolitical risks" than the "geopolitical risks" themselves.


5) Reactions on social media: Investor sentiment shifts from "myth" to "dry reality"

There were three prominent reactions on social media to these developments.

 

A. "Gold fluctuates in the short term. Ultimately, it's about monetary policy."

In the gold community, there's a strong view that "geopolitics is just a short-term spice, and the main factors for gold are currency value and interest rates." Past conflicts have shown that even if gold initially spikes, it is often pushed back by rate hikes and a stronger dollar. This time, too, there were many cool-headed voices saying, "Even if gold is bought momentarily during a crisis, ultimately interest rates and the dollar prevail."

B. "If it goes down, it's a buying opportunity. In fact, the factors are increasing."

On the other hand, there are voices welcoming the dip. As long as the major themes of "fiscal deterioration, currency dilution, and long-term uncertainty" continue, the upward trend for gold remains intact. The idea is that short-term declines are position adjustments, and with time on their side, it's not a problem.

C. "The fact that even gold is being sold is a sign of a 'cash-out chain reaction.'"

When stocks and other assets become volatile, investors may sell profitable assets to cover losses or prepare for additional margin. On social media, there was a shared view that "gold being sold is a phenomenon close to the peak of fear." In other words, some people see "gold going down" not as a bearish factor but as a temporary supply-demand phenomenon.


Looking at it this way, the sentiment on social media leans towards questioning the "gold in times of crisis" myth and prioritizing **which fear is dominant (war itself, inflation, interest rates, or liquidity)**.


6) How should investors act: 3 realistic checkpoints

Finally, if we use this situation as a "lesson," here are three points to consider.

① When looking at gold, also look at the "dollar" and "real interest rates"

Judging gold's rise or fall in isolation can lead to confusion in situations like the current "reverse rotation." The direction of the dollar (especially the dollar index) and real interest rates (nominal interest rate - inflation expectations) tends to determine the foundation for gold.

② "Geopolitics" is not monolithic. The strength of energy chains is key

Even in the same war, the stronger the bottleneck in resources and logistics, the more inflation concerns come to the forefront. The more inflation comes to the forefront, the more central banks are seen as hawkish, creating headwinds for gold.

③ "Safe assets" do not have fixed seats

In every crisis, the main safe asset changes. Is it cash (dollars), bonds, or gold? The haven changes based on what the market fears most. This market showed that "reshuffling of seats."


Conclusion

"Gold in times of crisis" remains a powerful narrative. However, it is not a universal switch. This time, gold's struggle and decline were because the market weighed "inflation resurgence and rate hike expectations" more heavily than "war risk," and funds flowed into the most liquid assets, the dollar and U.S. Treasuries, during the crisis.


Even if there is only one crisis, there are multiple paths of fear. In an era where the market doesn't react reflexively, we need to read "what is the starting point and which chain is dominant." The decline in gold is not the "end of gold," but rather an important sign that the market is selecting havens based on the "shape of fear."


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