When Oil Turns into "Gold"

WealthCoffee · 2026-03-24T02:04:00+00:00

Since the outbreak of the Middle East conflict on February 28, market expectations have shifted from short-term shocks to medium-term disturbances. Although precious metals generally perform better in stagflationary environments, gold has recently underperformed risk assets, possibly due to cash flow pressures and supply shortages. In the short term, gold's movement depends on the situation in the Middle East, but from a medium to long-term perspective, it is still advisable to allocate gold as a hedge against the credibility of fiat currency.

WealthCoffee

2026-03-24 02:04:00

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Since the outbreak of the current Middle East conflict on February 28, the overall situation has been escalating, and market pricing of the conflict’s duration and impact continues to update. The probability distribution is shifting from “short-term shock” to “medium-term disturbance.”

Generally, in an environment of stagflation, the dual attributes of safe-haven and inflation resistance make precious metals like gold perform well. However, in this cycle, gold and similar assets have underperformed compared to most risk assets. This article explores the logic and certain inevitability of this divergence. Gold may have already become a “canary in the coal mine” amid trends such as cash flow pressure and material shortages in Gulf countries, emerging markets, and globally. Its short-term trend largely depends on the intensity of tensions in the Middle East. However, in the medium to long term, we maintain our recommendation to allocate to scarce resources like gold as a hedge against fiat currency credibility. Meanwhile, although the US-Israel-Iran conflict has temporarily boosted risk aversion, it will further reinforce the logic of expanding global capital expenditure and a significant increase in material consumption in the medium to long term.

We recommend accessing Caixin’s database for real-time macroeconomic data, stocks, bonds, corporate profiles, and financial information.

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