Gold and Geopolitics: Why Prices Aren’t Surging the Way Many Expected

Pedro Paris
Mar 6
2 min read

During periods of geopolitical tension, investors often expect gold to rally sharply. Historically, the metal has acted as a safe-haven asset during times of conflict and financial stress.

Yet recent price action has surprised many traders.

Despite rising geopolitical tensions and volatility across energy markets, gold has not surged as dramatically as some expected. Instead, prices have been moving in a more volatile, two-sided pattern.

The explanation lies less in geopolitics itself and more in the broader macro environment.

The Dollar Is Absorbing Safe-Haven Flows

One of the main reasons gold has not surged is the strength of the US dollar. In times of global uncertainty, capital often moves toward dollar liquidity first. When the dollar strengthens, it tends to limit gold’s upside because the metal becomes more expensive for international buyers.

In other words, the dollar is currently absorbing part of the traditional “safe-haven” demand that might otherwise push gold higher.

Interest Rate Expectations Still Matter

Gold is a non-yielding asset. When interest rates remain elevated, the opportunity cost of holding gold increases. Recent expectations that central banks may delay rate cuts, partly due to inflation risks from rising energy prices have created a balancing effect in the gold market.

This creates a push-and-pull dynamic:

Geopolitical risk supports gold
Higher yields limit the upside

Gold Is Moving — Just Not in a Straight Line

It is important to recognise that gold has not been weak. The metal has still benefited from global uncertainty, but the path has been volatile rather than explosive. This is typical when several macro forces collide at once.

Geopolitics pushes investors toward safety.
Monetary policy pulls capital toward yield.

What This Means for Traders

Gold rarely moves on geopolitics alone. The metal sits at the intersection of several macro drivers:

Interest rate expectations
Currency strength
Inflation pressures
Risk sentiment

When these forces move in different directions, volatility increases. Geopolitical headlines may trigger moves but macro conditions determine how far they go.

Final Thoughts

Gold’s role as a defensive asset has not disappeared, but in today’s environment it is competing with a powerful rival: global demand for dollar liquidity.

Until monetary policy expectations shift decisively, gold may continue to trade in volatile swings rather than a sustained breakout. Understanding that macro balance is far more valuable than reacting to headlines.

Source: Economic Times — Gold price volatility explained.

— Pedro Paris

Founder, Candlester

Pedro Paris is the founder of Candlester, writing on macro markets, capital allocation and disciplined risk frameworks.