Gold remains one of the few global assets that responds positively to both inflationary uncertainty and geopolitical shock. The current market is mispricing both.

First, the geopolitical dimension: the Israel–Iran conflict has crossed into uncharted territory. We are no longer talking about proxy skirmishes there are now direct attacks on sovereign infrastructure and high-value targets. If this leads to disruption in oil exports, it will trigger a global inflation scare, reigniting demand for hard assets and stores of value. Gold is the first responder in that environment.

Second, on the monetary side, the Fed’s reaction function is shifting. CPI data shows disinflation is occurring, but slowly. The Fed wants confirmation before it cuts which means real rates will stay elevated, but the longer-term trajectory is toward policy easing. In that twilight zone where rate cuts are coming, but risk remains elevated gold tends to outperform, as it did in the early cycles of 2008 and 2019.

Also worth noting: China has been increasing its gold reserves at an aggressive pace. The PBoC and other central banks are de-dollarizing slowly but methodically, and that structural bid remains a tailwind for gold through any volatility.

This is a trade on global fragility, central bank caution, and persistent geopolitical threat. Gold becomes the macro hedge when both inflation and trust are questioned.

LONG XAUUSD

Jun 16 2025