War, oil spike, crisis — yet gold is falling - Why the safe-haven metal is down 18.6%

Gold prices have fallen sharply despite one of the most geopolitically tense periods in decades, puzzling investors who typically expect the metal to rise during wars and oil shocks. A new institutional analysis titled “Gold’s Paradox: War, Oil Shocks, and a Falling Safe Haven” by LynAI Mines explains why gold has dropped nearly 18.6% from its all-time high and what forces are driving the weakness.

Gold hit a record high of about $5,589 per ounce in January 2026 but fell to nearly $4,551 by March, marking the worst decline in decades even as the US-Iran conflict intensified, oil prices surged above $100 per barrel, and global uncertainty increased. According to the report, the key reason is that gold is not reacting to fear — it is reacting to interest rates, dollar strength, and changes in global reserve flows.

What is pushing gold lower

The report identifies three major forces behind the decline: a hawkish US Federal Reserve, a stronger dollar, and the oil shock.

The Federal Reserve has signalled that interest rates may stay higher for longer after revising inflation forecasts upward. Higher rates increase real yields, making gold less attractive because it does not pay interest. Investors tend to move money into bonds and dollar assets when yields rise, putting pressure on gold prices.

At the same time, the US dollar has strengthened, pulling safe-haven flows away from gold. Since gold is priced in dollars, a stronger currency makes the metal more expensive for global buyers and reduces demand.

The third factor is the oil shock. Normally, war in the Middle East should support gold, but the surge in oil prices is pushing inflation higher, forcing central banks to stay hawkish. This strengthens the dollar and raises yields, which ultimately hurts gold. The report calls this the “oil shock paradox,” where the very crisis that should support gold ends up weakening it.

Reserve flows are slowing

Beyond short-term macro factors, the report highlights a deeper structural reason for the decline: global reserve flows are changing.

After 2022, many countries increased gold purchases to diversify away from US Treasuries, leading to record central bank buying. However, the current oil shock is hurting the finances of major surplus countries such as Saudi Arabia, the UAE, and Kuwait, which had been key buyers of gold.

Lower oil revenues mean less surplus capital and less reserve accumulation, reducing demand for gold. China, the world’s largest oil importer, is also facing higher import costs and slower growth, which further limits reserve buying. The report says gold is falling not because it has lost its safe-haven status, but because the liquidity that supports gold demand is shrinking.

Silver falling faster than gold

The weakness is even more visible in silver, which has dropped about 28% from recent highs. Unlike gold, silver has large industrial demand, so slower global growth hurts prices more. The report notes that silver tends to amplify gold’s moves, rising faster in rallies and falling more sharply in corrections.

Bull market intact, but short-term risks remain

Despite the correction, the report says the long-term bull case for gold is still intact. Physical demand remains strong, and the sell-off is largely driven by futures market liquidation rather than a collapse in real demand.

Technically, gold may test key support near $4,200, but analysts still expect higher prices over time if rate cuts resume, the dollar weakens, and central banks continue diversifying reserves.

The report concludes that the current decline is not a breakdown of gold’s safe-haven role, but a temporary clash between geopolitics, monetary policy, and global liquidity.