Despite rising tensions in the Middle East and concerns over a prolonged oil shock – a textbook political‑risk event if ever there was one – the gold price initially softened. It has since recovered, reflecting investors’ renewed optimism around the possibility of de‑escalation.
But if gold doesn’t consistently hold its value in moments of crisis, can it truly be called a safe‑haven asset? The answer may depend on how we define both “safe haven” and “crisis.”
After all, the gold price has increased in value over a period of immense uncertainty, with tariffs and the prospect of a softening economy driving record gold prices.
Indeed, as a World Gold Council market strategist told the Financial Times: “as speculative investors became more dominant in the sector last year — rather than other traditional drivers of demand such as the jewellery sector — the gold price had become more volatile and was likely to remain so.”
Strength in diversity
In a sense, then, gold was doing what it was supposed to do: acting as a source of value during a moment of seismic political instability.
In this, perhaps, more modest sense, gold remains an invaluable source of diversification, rather than an asset that will hold its value in even the most extreme conditions.
After all, in an age of sustained crisis – at the moment of “polycrisis”, to use to term popularised by historian Adam Tooze – its hard to pinpoint precisely where political risk begins and ends.
But if we are to rely on gold as a way to diversify our portfolios, it helps if we can anticipate drivers of the yellow metal’s value.
Perhaps we should be careful what we wish for. As FT’s Alphaville reminds us, the once dependable relationship between long-term real interest rates and gold hasn’t really held since the start of the war in Ukraine. However, the blog wryly notes, “Alphaville isn’t calling for the old relationship between gold and long-term real yields to re-couple. But if it did, the gold price would need to head a long long long way down from here.”
On the other hand, Wells Fargo has just raised its 2026 year-end gold price forecast to $6,100–$6,300 per ounce.
Further reading:
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