The US-Iran conflict erupts. How has gold performed during previous Middle East conflicts?

Recently, the situation in the Middle East has suddenly escalated. CCTV News confirmed that Israel launched a preemptive strike against Iran, and the U.S. simultaneously carried out military actions against Iran. Iran’s Supreme Leader Khamenei was assassinated, and the Iranian president emphasized that Iran will hold those responsible accountable. The intensity of the geopolitical conflict far exceeds that of last year. International gold prices have surged, with spot gold reaching $5,278 per ounce last Friday.

The core change in this round of conflict is the direct involvement of the United States, transforming expected risks into actual military confrontation, which systematically raises the risk premium for global strategic resources. In the short term, geopolitical risks naturally act as catalysts for gold, with increased safe-haven demand likely driving prices higher; in the medium term, the Fed’s rate cut cycle, global de-dollarization, and ongoing central bank gold purchases continue to strengthen the fundamentals; in the long term, the dollar’s credit system faces structural challenges, and gold’s role as a “safe asset” is being revalued by sovereign and institutional investors. Under multiple logical resonances, the performance of the gold sector warrants attention.

【Short-term Catalyst: Escalation of US-Iran Conflict, Safe-Haven Sentiment Explodes】

On February 28, the U.S. and Israel launched military strikes against Iran, entering a state of war in the Middle East. Iran’s Supreme Leader Khamenei was attacked and killed. Geopolitical risk is a natural catalyst for gold, with safe-haven demand surging, supporting gold prices.

The conflict’s intensity far exceeds previous levels. Unlike the limited U.S. strikes on Iran’s nuclear facilities in June last year, this operation is a “large-scale and ongoing” military attack aimed at completely destroying Iran’s missile industry. The U.S. military also deployed two aircraft carriers in the Middle East, indicating a serious escalation. Additionally, Iran’s Supreme Leader Khamenei was assassinated. Guosen Futures pointed out that this black swan event is expected to trigger global safe-haven sentiment, prompting countries to prepare for potential loss of control.

Gold prices reacted swiftly and sharply. Following this shock, international markets experienced intense volatility, with COMEX gold rising nearly 2%, approaching the $5,300 per ounce level. As of last week’s close, spot gold was at $5,278.33 per ounce, up 3.27% for the week.

The Strait of Hormuz becomes a focal point. Iran controls the Strait of Hormuz, through which about 30% of global oil shipments pass. Escalating conflict can lead to fears of supply disruptions, pushing up oil prices and, through inflation expectations, further supporting gold prices.

【Historical Review: Middle East Geopolitical Conflicts May Catalyze a Gold Bull Market】

Looking back at history, geopolitical risk events have increased global uncertainty, and safe-haven demand tends to boost gold prices in the short term.

Data source: ifind; all references are to SG Gold 9999 (AU9999) price increases during risk events. Price trends are for reference only, not investment advice, and do not predict future performance.

Furthermore, major conflicts in the Middle East, especially those involving oil supply, could accelerate a gold bull market. From the 1973 oil crisis to the 1979 Iranian Revolution, geopolitical risks have historically acted as catalysts for gold price increases.

1973 Fourth Middle East War: Oil prices soar, initiating the first major rally in gold. Wind Securities reviewed that in October 1973, the Fourth Middle East War broke out, OPEC announced an oil embargo, and international oil prices jumped from about $2.50 per barrel to nearly $12. The U.S. economy entered “stagflation”—inflation soared, GDP turned negative, and recession set in. During this period, gold’s “inflation hedge” and “safe-haven” attributes drew capital, causing prices to surge from the post-Bretton Woods free-floating level in 1971 to about $180 per ounce by late 1974.

Source: Guolian Minsheng Securities Research Institute

1979 Iranian Revolution: Second oil crisis, gold hits historic peak. Many countries accelerated repatriation of gold stored in the U.S., pushing de-dollarization forward. Turbulent geopolitics, stagflation, and a weak dollar drove gold prices to new heights—rising from $217/oz in early 1979 to $850/oz by January 1980.

Source: Guolian Minsheng Securities Research Institute

Lessons from history: During both Middle East oil crises, gold prices multiplied several times. Wind Securities summarized that ongoing Middle East tensions and rising geopolitical risks are key drivers of gold as a hedge against “economic and policy uncertainty.” The current U.S.-Israel military actions, far more intense than last June’s conflict, with U.S. direct involvement, could mirror the strong historical impact of Middle East conflicts on gold prices. However, short-term risks of sharp pullbacks following pulse-like surges should also be monitored.

Central bank actions confirmed by history: After the Iran hostage crisis in 1979, many countries accelerated gold repatriation due to concerns over dollar assets, aligning with today’s trend of central bank gold purchases and de-dollarization. Guolian Minsheng Securities noted that the 2022 freeze of Russian foreign reserves was a pivotal event prompting many central banks to reassess reserve safety, leading to a significant increase in official gold holdings. History and current reality intersect here, reinforcing gold’s role as a “safe asset.”

【Medium-term Support: Rate Cut Expectations + De-dollarization, Three Pillars Strengthen】

Beyond short-term geopolitical catalysts, the medium-term outlook for gold remains solid. The Fed’s rate cut cycle, global de-dollarization, and ongoing central bank gold purchases provide structural support.

Rate cut cycle may continue, weak dollar benefits gold. Previously, U.S. tariffs deemed illegal were revoked, reducing fiscal revenue and raising concerns over U.S. debt, while easing domestic inflation pressures, opening room for rate cuts.

De-dollarization accelerates, central bank gold buying becomes routine. As the dollar’s share in global reserves declines amid rising U.S. debt, investors’ confidence in the dollar’s credit weakens. Under de-dollarization, the long-term outlook for gold remains positive. Wind Securities stated that since 2022, global monetary authorities have purchased over 1,000 tons of gold for three consecutive years, with gold surpassing the euro to become the second-largest reserve asset after the dollar by 2025. Guolian Minsheng Securities pointed out that the dollar’s share in official reserves has fallen from about 71% in 2000 to around 56% in Q2 2025, the lowest in 25 years.

Source: World Gold Council, Western Securities R&D Center

Central bank gold purchases continue to provide positive support. Although 2025’s purchases may slow, net buying remains high historically, with no signs of liquidation. The World Gold Council’s 2025 survey shows that the top reasons for central banks holding gold include its performance during crises, diversification, long-term value storage, no default risk, and geopolitical risk hedging.

【Long-term Reassessment: From Safe-Haven Asset to Value Anchor, a Paradigm Shift for Gold】

Gold’s recent rise reflects not only short-term safe-haven demand but also structural changes in the global monetary system. Guolian Minsheng Securities noted that the persistent deviation of gold prices from traditional valuation models may signal deeper structural shifts—gold could evolve from a safe asset to a “value anchor” in the new order.

Gold’s “anchor” function becomes prominent. Northeast Securities reviewed the 1970s gold bull market, noting that loosening fiscal and monetary discipline led to a decline in the value of credit money, with gold prices rising as a response. Currently, the U.S. maintains a fiscal deficit of over 6%, with government debt expanding, and the White House increasing control over the Fed, pushing fiscal and monetary policies toward expansion. Guolian Minsheng Securities believes that, due to its sovereignty-free nature, historically low credit risk, and broad market acceptance, gold is viewed as a high-acceptance reserve asset amid evolving multipolar currency systems.

Contrasting with interest-bearing assets. Changjiang Securities pointed out that the relative strength of gold versus interest-bearing assets (like the S&P 500) exhibits cyclical rotation, with both yielding around 7.2% annualized returns currently. Gold has recently approached the performance of U.S. stocks, and in the coming months, the outcome may be decided. During periods of stagflation post-1972 and recession after 2007, a “strong gold, weak stocks” pattern emerged, offering valuable reference for the current environment.

Source: Changjiang Securities Research Institute

【Investment tools: Gold ETF (518800) vs. Gold Stock ETF (517400), how to choose?】

With a clear long-term trend in gold, selecting the right investment vehicle depends on the investor’s preference for “resilience” versus “certainty.”

The Gold ETF Guotai (518800) is a direct tool to track gold prices, while the Gold Stock ETF (517400) offers higher performance leverage—mining companies’ profits tend to amplify as gold prices rise, driving valuation and earnings growth.

In the context of a clear long-term gold trend, the choice depends on the investor’s risk appetite and outlook.

Gold ETF Guotai (518800)’s main advantage is “purity.” Its price closely tracks spot gold, making it the most direct expression of gold price views. For investors seeking pure gold exposure and risk avoidance of individual stocks, this ETF provides a convenient channel.

Gold Stock ETF (517400) offers higher performance amplification. Mining profits are highly correlated with gold prices but more elastic: when gold rises, costs remain relatively stable, profit margins expand significantly, boosting EPS and valuation.

For investors, amid the escalation of US-Iran conflict, continued rate cuts, and accelerating de-dollarization, gold’s allocation value is highly certain. Using Gold ETF Guotai (518800) and Gold Stock ETF (517400) for deployment allows capturing short-term geopolitical catalysts and serving as core holdings for long-term “safe asset” allocation.

(Source: Daily Economic News)