Since the outbreak of the U.S.-Iran conflict, the international gold price has fallen by approximately 12% cumulatively, leading some market participants to question whether gold's safe-haven properties have diminished.

Ewa Manthey, a commodity strategist at ING, analyzed that this round of gold price decline is not due to a collapse of gold's safe-haven function but rather stems from macroeconomic chain reactions triggered by oil prices. Energy shocks have pushed up inflation, strengthened the U.S. dollar, and driven up U.S. Treasury yields, collectively pressuring gold prices. However, ongoing central bank gold purchases, a recent return of ETF inflows providing underlying support, combined with expectations for the Federal Reserve to cut interest rates in the second half of the year, keep the medium- to long-term bullish thesis for gold intact. Institutions are optimistic that gold could challenge the $5,000 per ounce level by year-end.

The decline in gold prices follows a specific logic and does not indicate a failure of its safe-haven attribute. Manthey stated that gold's safe-haven advantage typically becomes prominent during financial crises or periods of slowing economic growth, when real yields fall and the dollar weakens, creating the most favorable conditions for gold to rise. The current situation, however, is driven by a supply-side energy price shock, presenting a completely opposite market dynamic. Soaring oil prices have elevated inflation levels, forcing major central banks to maintain high interest rates, while the U.S. dollar has concurrently strengthened. These multiple factors have collectively weighed on gold. Furthermore, ample liquidity in the gold market has made it a source for investors to liquidate positions to cover losses in other investments, further amplifying the correction.

Recalling market performance during the 2022 Russia-Ukraine conflict, Manthey noted that gold prices briefly spiked at the initial onset of geopolitical risk. Subsequently, rising energy prices pushed up U.S. Treasury yields and the U.S. dollar index, leading to a gradual decline in gold prices under pressure. The logic behind the price action following the recent U.S.-Iran conflict is highly similar, with the adjustment occurring at a faster pace. This reflects a typical macro-factor-driven trend rather than a weakening of gold's safe-haven status.

Gold currently faces multiple headwinds. The Federal Reserve held interest rates steady in April, with Chair Jerome Powell adopting a cautious stance. The U.S.-Iran conflict has reignited inflation concerns, significantly dampening near-term market expectations for rate cuts. Institutional economists still anticipate potential rate cuts in the second half of the year. However, if energy supply tensions persist, the timing of cuts could be delayed. High real yields and a strong dollar remain the core factors constraining gold's upside.

After U.S. President Trump rejected Iran's latest peace proposal, gold gave up its earlier gains. The dashed hopes for a geopolitical ceasefire have kept inflation risks elevated, reinforcing the market consensus that interest rates will remain higher for longer.

The latest U.S. employment data showed resilience, with continued job growth and a stable unemployment rate, giving the Fed little reason to cut rates immediately. In the short term, U.S. Treasury yields and the dollar will likely continue to suppress gold performance. This week's inflation data is expected to further cement the Fed's cautious policy stance. Additionally, with Chair Powell's term ending this week, uncertainty regarding the future direction of Fed policy has increased.

Despite short-term pressure on gold prices, sustained central bank gold buying continues to provide solid support for the market. A major Asian central bank increased its gold holdings again in April, with the monthly purchase volume reaching the highest level since December 2024. This marks the 15th consecutive month of purchases, steadily increasing total reserves. Globally, central banks maintained a net purchasing trend in the first quarter. While Turkey reduced some gold holdings to supplement foreign exchange liquidity, countries like Poland continued steady accumulation, reflecting a long-term positive for gold from reserve diversification demand.

Positive changes are also emerging on the fund flow front. While gold ETFs experienced sustained outflows following the U.S.-Iran conflict outbreak, global gold ETFs shifted to net inflows in April. European funds led the return, highlighting market concerns over shipping risks in the Strait of Hormuz. Current ETF holdings remain significantly below historical peaks, suggesting substantial room for future increases. Furthermore, speculative institutional positioning remains steady, without showing excessively pessimistic one-sided bets.

ING remains optimistic about gold's medium- to long-term trajectory. While the deadlock in U.S.-Iran talks brings short-term uncertainty, the path for gold's upward movement is clear, contingent on three conditions: a retreat in energy prices, cooling inflation, and Fed rate cuts in the second half of the year. Ongoing central bank purchases and ETF inflows will provide combined support. The institution forecasts that the international gold price could reach $5,000 per ounce by year-end. The primary downside risk lies in a prolonged geopolitical stalemate and persistently high energy prices, which could force the Fed to keep rates unchanged throughout the year.

Manthey emphasized that short-term gold price fluctuations are dominated by real yields, dollar strength, and Fed policy expectations. However, the fundamental logic of gold as a safe-haven and inflation hedge remains unchanged. Once the prevailing macro headwinds gradually subside, gold's intrinsic supportive forces will once again dominate price trends.

In summary, the recent 12% correction in gold is the result of combined effects from the energy shock, a strong dollar, and a high-interest-rate environment, not a failure of its safe-haven property. In the short term, gold faces volatile adjustments constrained by inflation, Fed policy, and the geopolitical situation. However, ongoing global central bank accumulation and marginally improving fund flows provide underlying support. As inflation is expected to recede later and expectations for second-half rate cuts build, gold's medium- to long-term upward trend remains intact, retaining the potential to challenge higher levels by year-end.

As of 11:36 Beijing time on May 13, spot gold was trading at $4,704.33 per ounce.