Global gold at the crossroads of crisis

By: Amir Reza Etasi

Introduction: The Current State of the Gold Market

Over the past five decades, gold has proven to be a sensitive indicator of global crisis—rising in response to geopolitical conflict, economic upheaval, and shifting monetary policies. From the oil shocks of the 1970s and the Iranian Revolution to the 2008 crash, COVID-19, and recent Middle East tensions, gold has reliably served as a safe-haven asset. Its price surges often reflect deep-rooted distrust in fiat currencies and political or financial instability. This article analyzes how major macro shocks and policy responses have shaped gold’s trajectory over time.

2. Gold Price Volatility in Major Wars and Crises of the Past 50 Years

Gold has consistently acted as the world’s premier safe-haven asset, reacting to nearly every major global crisis. This section explores how gold responded to pivotal geopolitical shocks—from the 1973 Yom Kippur War to the COVID-19 pandemic and the Iran–Israel conflict—revealing patterns in price behavior tied to the nature and intensity of each event.

Key Crisis Highlights:

• 1973 Yom Kippur War:

The oil embargo and global inflation drove gold up 115%, establishing it as a crisis hedge.

• 1979 Iranian Revolution:

Political upheaval and oil shortages spurred a 160% rise; the Fed’s tightening eventually tempered further gains.

• Soviet–Afghan Invasion (1979):

Intensified global risk pushed gold to a record $850, cementing its role in systemic crises.

• Iran–Iraq War (1980–88):

Initial gains reversed as Fed policy and a strong dollar led to a 70% drop over the decade.

• Gulf War (1990–91):

Gold spiked 20% briefly but quickly retreated after US-led crisis stabilization.

• 9/11 & Afghanistan (2001):

Triggered a long-term bull run, driven by monetary easing and heightened risk aversion.

• Iraq War (2003):

Uncertainty lifted prices above $400; central banks fueled a lasting rally through 2011.

• 2008 Financial Crisis:

Collapse of financial systems drove gold to double, aided by quantitative easing and inflation fears.

• Arab Spring & Regional Unrest (2011–15):

Brief surges were short-lived due to lack of global economic contagion and policy tightening.

• Ukraine, COVID-19, Iran–Israel (2014–2025):

Gold reached new highs, but tighter monetary conditions and dollar strength have capped further rallies.

Historical Pattern:

Gold’s largest gains occur during widespread geopolitical or economic crises that shake confidence in fiat currencies. Localized or short-term conflicts yield brief, limited reactions. Key drivers include the scale of uncertainty, global contagion potential, dollar performance, and central bank posture.

Notably, after each major crisis since 2001, gold has settled at structurally higher levels—now stabilizing around $3,400 amid ongoing tensions.

3. Structural Shifts and Market Psychology: Gold in the Short, Medium, and

Long Term

Over five decades, gold’s price has mirrored investor sentiment—rising with fear, falling with renewed confidence. Shifts in monetary policy, crises, and collective behavioral trends have triggered clear bull and bear cycles. Gold’s role as a hedge strengthens whenever trust in financial systems erodes.

Major Market Cycles:

1. The Great Rally (1976–1980):

Gold soared 773% amid inflation, oil shocks, and geopolitical chaos. Panic over fiat currencies drove record demand.

2. The Long Decline (1980–1999):

Prices fell over 70% as Volcker-era policies restored confidence in the dollar and US institutions. Capital shifted to equities and bonds.

3. Second Bull Market (1999–2011):

Gold rebounded 654% on the back of post-9/11 uncertainty, the 2008 crisis, and global central bank buying—especially from emerging markets.

4. Correction Phase (2011–2015):

A 45% drop followed as markets normalized, rates rose, and the Fed tapered QE. Investors turned to risk assets.

5. New Highs (2015–2025):

Fueled by COVID-era stimulus, inflation, and geopolitical shocks, gold jumped 225%, reaching $3,450. Every correction invited new inflows as fear persisted.

4. Conclusion & Gold Price Scenarios: Between Doubt and Hope

The gold market is navigating a critical juncture. Historically, major geopolitical shocks—from the Yom Kippur War to the Iran–Israel crisis—have triggered sharp rallies followed by corrections. Today, both technical signals and macroeconomic trends point to a moment of strategic tension, shaped by two contrasting trajectories.

Scenario 1: Correction Below $3,300

If gold breaches the $3,300 support, technical patterns suggest a drop toward $2,660–$2,470.

This path reflects a potential normalization driven by:

• A stronger US dollar, fueled by rising real interest rates and continued hawkishness from the Federal Reserve;
• A fall in oil prices if regional tensions ease or supply increases, which could reduce inflationary pressure;
• De-escalation in the Iran–Israel conflict, which may quickly deflate gold’s risk premium;
• Active profit-taking or reserve selling by central banks like China or Turkey.

In such a case, gold could consolidate at lower levels temporarily. However, the broader bullish

macro trend—shaped by post-pandemic liquidity and longer-term inflation concerns—would remain intact.

Scenario 2: Breakout Above $3,509

Conversely, if gold breaks the key resistance at $3,509 with momentum, it could enter a new bullish phase, targeting $4,000 and beyond. This would likely require a confluence of:

• Escalation in geopolitical risk, e.g., expanded conflict in the Middle East or disruption of critical energy corridors like the Strait of Hormuz;
• Continued monetary accommodation, where central banks avoid raising rates to support struggling economies;
• Renewed US dollar weakness, driven by structural fiscal imbalances, debt sustainability concerns, or market expectations of rate cuts;
• Commodity market shocks, such as surging oil prices due to sanctions or supply constraints, which increase demand for inflation hedges. In this scenario, even pullbacks could serve as launching points for further gains, as investor flows shift decisively into safe-haven assets.

Key Variables at Play

• Monetary Policy:

Gold remains inversely sensitive to real interest rates. Hawkish stances tend to cap rallies; dovish pivots reignite upward momentum.

• Dollar Dynamics:

As the global reserve currency, the dollar’s strength or weakness dramatically affects gold pricing in international markets.

• Inflation & Oil:

Rising energy prices heighten inflation fears, lifting gold. Conversely, falling oil often signals easing pressure.

• Geopolitics:

Markets react not only to active conflict but also to perceived risks of escalation. The “psychological premium” on gold is often driven by expectations, not just facts on the ground.

Bottom Line: Between Risk and Resilience

Gold is caught between “fear of instability” and “hope for normalization.” While major crises generate swift price moves, the durability of trends hinges on broader economic narratives: inflation control, rate policy, dollar trajectory, and geopolitical fallout. Like in previous global disruptions, gold’s fate in the coming months will not be shaped by headlines alone—but by the intersection of psychology, policy, and structural risk.

The writer can be reached at [email protected]