Safe Haven Assets Losing Their Shine? Iran Conflict Escalates as Gold Breaks Below $5000

On Monday during the Asian trading session, spot gold prices fell below the key psychological level of $5,000 per ounce.

As concerns over energy inflation triggered by the Iran war linger and no signs of easing in this conflict, gold prices have been on a continuous decline over the past two weeks.

This has not only caused confusion among investors—since gold is traditionally considered the king of safe-haven assets—why is its hedging property not working this time?

Spot gold prices broke below $5,000 early this morning

On Monday morning, spot gold opened with a rapid plunge, quickly dropping below $5,000 and reaching a low of $4,966. However, by the time of this report, the decline narrowed to 0.25%, bringing it back above $5,000. Meanwhile, gold futures also fell by 1.3% early this morning to $4,996.96 per ounce. This is the first time in nearly a month that spot gold has fallen below the $5,000 mark.

In addition to gold, spot silver also dropped by 1.8% to $79.18 per ounce early this morning, breaking the $80 level, though the decline narrowed to 1.2% by the time of this report. Spot platinum rose by 1.1% to $2,050 per ounce.

The main culprit behind the early morning decline in gold prices is the ongoing tension in Iran, which still shows no signs of easing.

Earlier, the U.S. bombed Iran’s main energy hub, Kharg Island, over the weekend, prompting a strong retaliatory response from Iran. Iran threatened to escalate Middle East conflicts further, stating it would target any U.S.-related facilities in the region. On Monday morning, international oil prices continued to surge, with WTI crude oil surpassing the $100 per barrel mark again.

However, on Monday, as U.S. President Trump announced negotiations to form a convoy alliance to reopen the strategic Strait of Hormuz, the increase in oil prices slowed.

Is the safe-haven property failing?

Gold prices are largely influenced by the volatility of the conflict—but as a traditional safe-haven asset, gold seems to be underperforming this time.

Since the outbreak of the Iran conflict, gold has been weak. Over the nearly two weeks since the conflict began, gold has fallen by more than 6%.

Analysts point out that although gold is considered a safe-haven asset, investors are more worried that the inflationary shock caused by the Iran war will lead the Federal Reserve to delay interest rate cuts. The environment of sustained high interest rates is expected to strengthen the dollar and suppress gold prices.

Additionally, the Federal Reserve’s upcoming March monetary policy meeting is approaching, and market caution ahead of the meeting has further pressured gold prices—markets fear that in the face of persistent inflation, the Fed may adopt a hawkish stance at this meeting.

An analyst from ANZ Bank stated in a recent report:

“Due to the strengthening dollar, rising yields, and policy uncertainty at the Fed, gold has been impacted. Also, traders closing positions to meet margin calls have affected gold prices.”

However, the analyst from ANZ Bank emphasized that gold remains a safe-haven asset in response to geopolitical uncertainties, and this fundamental fact has not changed. Therefore, gold should not be overly undervalued.