Gold's Iran-war price decline shows the metal is doing one of its most important jobs

• Gold is considered a safe haven from global conflict, but the metal has struggled during the Iran war.
• Prices are below pre-war levels, but the metal is doing its job in another key way.
• Gold's use as way to keep US dollars flowing has helped countries reliant on energy revenues.

Gold is often thought of as the preeminent safe haven, but it's price action during the Iran war challenges that notion. Yet, its struggling price might be proof the metal is doing another important job.

After a historic price rally in 2025, the war has done little to help boost the metal. In fact, gold is trading below pre-war levels, down about 10% in the 10 weeks of the conflict.

Finance pros have puzzled over this fact, with the war marking one of the most significant geopolitical upheavals in years. But Kristian Kerr, head of macro strategy at LPL Financial, says there's a reason the metal is exhibiting such behavior.

"Understanding why requires stepping back and recognizing that gold does not sit neatly in any one asset category," he said. "It actually straddles several as gold simultaneously functions as a commodity, a reserve asset, and a currency surrogate.

That distinction is critical in assessing gold's recent price action and highlights an important but under-the-radar dynamic: that gold is an important way for countries to keep access to dollars in times of market disruption.

And countries reliant on energy exports for revenue, the disruption has been historic. In short, gold is functioning as a store of dollars, not a store of value during the war.

"Selling or swapping gold holdings provides immediate access to the currency that still sits atop the global funding hierarchy: the U.S. dollar," Kerr said. "This helps explain gold's unusual price action. Rather than seeing pure safe‑haven flows, we are likely getting official and semi-official supply, as some countries have been forced to monetize gold reserves to bridge revenue gaps created by disrupted oil exports."

It may be tempting to look at gold's price decline and assume that it is failing in its traditional function as the ultimate safe haven asset, but Kerr believes that isn't the correct interpretation.

Pointing to comments from Treasury Secretary Scott Bessent in early April, Kerr noted that the Iran conflict has sparked a need for US allies in the Persian Gulf to access large amounts of US dollars due to the significant economic stresses it has caused.

"In those moments, gold can function as less of a hedge and more as a balance sheet resource," he added. "That framing is critical. Gold is not failing in its role. It is simply being used."

Kerr noted even if the tentative resolution holds and the Iran war ends soon, gold prices are likely to remain volatile, as the path forward from a major energy shock often includes significant rebuilding.

"Until dollar funding pressures ease and energy flows normalize, gold may continue to trade less like a geopolitical hedge and more like a balance sheet asset," he said.

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