Gold prices have faced downward pressure since the Iran war began in late February, despite the metal’s traditional role as a safe-haven asset. The conflict, now entering its third week, has unsettled global markets after the United States and Israel targeted a major Iranian export terminal over the weekend, prompting threats of retaliation from Tehran.
The escalation has pushed oil prices above $100 per barrel, raising fears that the conflict could intensify global inflation. Even so, the XAU/USD pair has fallen about 5% since the war began, an unusual move for gold during periods of geopolitical tension.
Why Gold Prices Are Falling During the Iran Conflict
Historically, gold tends to rise during geopolitical crises because investors seek protection from market volatility and economic instability. However, the current situation has produced the opposite effect.
According to Lawson Winder, an analyst at Bank of America, many investors are selling gold to raise cash during a sharp decline in global equity markets.
Winder explained that investors have been using the safe-haven metal as a source of liquidity during the stock market selloff, preventing gold from benefiting from the broader geopolitical turmoil.
Strong Dollar and Higher Treasury Yields Pressure Gold
Gold has also been weighed down by rising U.S. Treasury yields and a stronger U.S. dollar, both of which tend to reduce the appeal of non-yielding assets like bullion.
Last week, gold prices dropped nearly 3%, while gold mining stocks also declined. The **iShares S&P/TSX Global Gold Index ETF fell 6.3% for the week.
At the same time, the **Philadelphia Gold and Silver Index declined 7.1%, and the **Market Access NYSE Arca Gold BUGS Index UCITS ETF lost 7.3%.
Long-Term Gold Outlook Remains Positive
Despite the recent selloff, many analysts believe the pullback could present a buying opportunity for long-term investors.
Colin Bosher, co-founder and chief strategy officer at Nuway Capital, said gold demand remains fundamentally supported by several structural factors.
These include ongoing geopolitical tensions, persistent inflation risks and continued central bank diversification of foreign exchange reserves.
Bosher also pointed to long-term inflation drivers such as the global energy transition, supply chain reshoring, rising defense spending and demographic pressures, all of which reinforce gold’s status as a store of value.
Gold Still Up Strongly in 2026
Even with the recent decline, gold prices remain significantly higher for the year. The precious metal has gained roughly 16% so far in 2026, highlighting the continued investor interest in gold as a long-term hedge against economic and geopolitical uncertainty.
