In the spring of 2026, gold is undergoing a crisis of confidence.
Following the outbreak of the U.S.-Iran conflict, this asset, often referred to in textbooks as the "ultimate safe haven," did not surge as expected. Instead, it fell sharply from its historical peak in January. In a world engulfed by conflict and disrupted energy channels, gold holders watched their positions evaporate, inevitably raising doubts: Is there something wrong this time? Market opinions have become divided: on one side are pessimists claiming that "the long-term bull logic has collapsed," while on the other are bullish believers arguing that "this is a once-in-a-century buying opportunity." However, taking a longer-term perspective and reviewing history reveals that this debate itself seems somewhat peculiar—because gold’s pattern of initially declining before rising during geopolitical crises has almost been a fixed historical script. Western Securities further stated in its latest report that regardless of the U.S. decision in the final stages of the Iran conflict, it will almost certainly lead to further cracks in the credibility of the U.S. dollar, paving the way for gold’s fourth major upward wave in the second half of the year. As of the afternoon of the 21st, spot gold was trading at $4,783 per ounce. After Trump hinted at an end to the conflict, gold prices began to rebound. However, the price remains about 14% below its historical peak in January.
The problem is not with gold but with liquidity-driven price distortions.
To understand this decline, one must first address a puzzling question: Why did gold fall instead of rise when war broke out? The answer lies not in gold itself but in the market’s "forced liquidation" logic. As oil prices surged and inflation expectations rose, bond yields were repriced. At the same time, global stock markets experienced significant corrections, triggering margin calls on numerous derivative positions. Fund managers faced a dilemma: sell the most liquid assets to meet margin requirements or face forced liquidation. Gold, being highly liquid, became the "firefighting bucket." Data firm Vanda estimates that global gold ETFs have seen outflows of approximately $10.8 billion since the conflict began. This does not reflect a loss of faith in gold but rather a lack of alternatives for investors. Meanwhile, the war has heightened inflation expectations, dampened hopes for interest rate cuts, and temporarily increased the relative attractiveness of bonds, further pressuring gold prices from a sentiment perspective. This is not a breakdown of gold’s pricing logic but a forced sale driven by a liquidity crisis.
The historical script: During oil crises, gold always falls before soaring.
If liquidity shocks explain "why it fell," historical experience provides the answer to "what happens after the decline." Changjiang Strategy reviewed the historical records of two 20th-century oil crises. During the first oil crisis in 1973, OPEC’s oil embargo led to blocked energy channels and a sharp rise in global inflation. Initially, market liquidity tightened, risk appetite plummeted, and gold experienced a phase of adjustment amid the liquidity squeeze. However, as inflation continued to rise and economic growth slowed, stagflation shifted from expectation to reality. Gold’s inflation-hedging attributes were reignited, pushing prices above previous highs and ultimately leading to a stunning trend-driven rally. The second oil crisis in 1979, triggered by the Iranian Revolution, followed an almost identical script: initial pressure due to liquidity tightening, followed by a brief adjustment, but stagflation logic ultimately dominated the latter phase, driving gold to new highs after a short pause.
These two episodes reveal a pattern: The impact of oil crises on gold follows a "first decline, then rise" curve rather than a straight line. Changjiang Strategy also highlighted a key clue: The expectation of "higher interest rates for longer," which has been suppressing gold prices, is now more fully priced in. Market expectations for a Fed rate hike by March 2027 have risen to nearly 30%, indicating that short-term bearish factors are closer to being "exhausted" rather than "just beginning." More importantly, inflation expectations have been revised upward. Comparing Bloomberg consensus forecasts from the end of 2025 to April 2026, inflation-related projections have clearly risen. In an environment of "rising inflation and weak economic recovery," real interest rates tend to decline rather than rise—this is the main driver for gold. Thus, Changjiang Strategy defines the current situation as a gradually opening window for allocation. The "dip" in gold prices is not a cause for fear but a consolidation of short-term risks.
A bigger story: Gold’s pricing power has quietly shifted.
While Changjiang Strategy explains "why there’s no need to change the outlook on gold," Western Securities attempts to answer a broader question: Why might the trend be stronger than expected? Cao Liulong, chief strategist at Western Securities, proposed a groundbreaking observation in his latest report: Over the past decade, gold’s correlation with U.S. Treasury yields and the U.S. dollar index has significantly weakened. If gold no longer follows interest rates or the dollar, what is it pricing? Cao’s answer is: Reserve value. Or more directly, gold is pricing the global level of trust in the U.S. dollar system. This assessment traces back to 2016. That year, China became the world’s largest goods trader, with RMB settlement accelerating in foreign trade and the share of USD settlement beginning to decline. Sovereign funds quietly began systematically reducing their holdings of USD assets, marking the start of gold’s first major upward wave. The second wave occurred after the 2022 Russia-Ukraine conflict, when the U.S. removed Russia from SWIFT and froze its foreign exchange reserves. This move shattered the implicit consensus that "foreign reserves are inviolable," prompting global central banks to realize that holding USD assets could be directly seized under extreme circumstances. IMF data show that central bank gold purchases hit record highs thereafter, characterized by "buying more as prices rise." The third wave took place in 2025. The Trump administration returned to the White Hall, and the "Big and Beautiful Act" significantly expanded fiscal deficits, pushing long-term rates higher and forcing the Fed to cut rates earlier. As monetary policy began serving fiscal needs, the Fed’s independence came into question, weakening the credibility of the dollar as a "rule anchor." Three major upward waves, three instances of damage to USD credibility—all following the same logic. Now, the focus shifts to the core pillar of the dollar—the "petrodollar" system.
The trigger for the fourth wave: The Strait of Hormuz is becoming a historic crossroads.
The petrodollar system is more fragile than most realize. Global oil is priced and settled in USD, oil-exporting countries reinvest their earnings in USD assets, and the U.S. ensures stability in the Gulf region and the free flow of oil trade through military power. This military-currency-energy triangle has sustained dollar hegemony for half a century. Western Securities’ analysis notes that in the early stages of the U.S.-Iran conflict, rising oil prices and expanded oil trade objectively strengthened short-term demand for USD settlement, temporarily restraining gold prices—this explains why gold did not immediately surge when the war began. However, this reinforcement is fragile. The real risk lies in the fact that whichever path the U.S. chooses, it could rupture this闭环:
If the U.S. chooses to withdraw or end the conflict prematurely, it would send a dangerous signal to Gulf allies: American military protection is unreliable. Once the security guarantee of the petrodollar collapses, the entire system loses its foundation. If negotiations succeed but Iran gains toll rights over the Strait of Hormuz, U.S. geopolitical dominance in the Middle East would be substantially weakened—and the foundation of USD credibility lies in its ability to maintain global free trade秩序. If the conflict becomes prolonged, defense spending soars, fiscal deficits worsen, and the Fed eventually resorts to printing money to cover the shortfall. A return to quantitative easing would dilute credit, forcing the market to reprice the dollar’s purchasing power.
This is a three-way crossroads, with each path leading to the same outcome: further erosion of USD credibility. "Unless the U.S. can quickly defeat Iran and restore free passage through the Strait, this conflict will likely become the final straw that breaks confidence in the petrodollar system."
Gold’s "fourth wave" is not a distant prospect but a near-term issue dependent on the conflict’s trajectory and policy choices.
Two sets of signals to verify whether it’s a "golden opportunity" or the end of the trend.
Of course, making a judgment and verifying it are two different matters. Based on the analytical frameworks of both institutions, the market’s pricing of gold will revolve around two sets of signals: First, whether liquidity and positioning pressures ease. Key indicators include whether gold ETF flows stabilize and whether passive deleveraging weakens. A return to net inflows in ETFs would signal that the "initial decline" phase is nearing its end, with the heaviest selling pressure already released. Second, whether stagflation and USD credibility narratives take over. Key factors include whether inflation expectations continue to rise and whether confidence in the petrodollar system is reassessed due to developments in the Strait of Hormuz and policy responses. Once global central banks accelerate gold purchases again, and once oil prices force the Fed to abandon rate hike expectations, gold’s primary drivers will regain control over prices. Within this framework, the current deep correction appears more like a cleansing that consolidates short-term risks—a classic "golden opportunity." Short-term liquidity panic has created a decline, but medium- to long-term pricing power is slowly shifting back to stagflation logic and USD credibility reassessment.
The deepest dips often make the best starting points.
History has a cruel sense of humor: The best buying opportunities always appear when you least want to buy. During the 1973 oil crisis, holding gold required perseverance amid liquidity tightening and market panic. During the 1979 Iranian Revolution, investors had to endure initial adjustments and skeptical glances. But history’s answer is clear: Those who recognized the logic during the darkest hours and positioned themselves during the "initial decline" ultimately reaped the era’s richest rewards. This time, the U.S.-Iran conflict has created a deep dip. ETF outflows, margin calls, and interest rate expectations are all real factors, stacking short-term selling pressure to its peak. However, the $10.8 billion in ETF outflows have not changed one fact: Global central banks are still buying gold, inflation expectations are still rising, and cracks in petrodollar credibility are still widening. Whether the "fourth wave" arrives will be determined by the persistence of stagflation trading and the pace of USD credibility erosion.