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In the most dangerous moments, gold is actually falling. This is not a coincidence but a pattern that has repeated over the past 45 years. The real question isn't "Why isn't gold rising," but rather what the market is prioritizing during a crisis.

When geopolitical conflicts erupt and missiles are flying, gold, as the "ultimate safe-haven asset," should soar. However, since the start of the Gulf War, gold has fallen by 12%, leaving many investors puzzled.
Why hasn't gold performed as expected during crises?
Adrian Day, Chairman and CEO of Adrian Day Asset Management, believes this phenomenon is actually very logical and completely normal.
"Historically, in terms of gold, after geopolitical events occur, gold often actually declines," Adrian explains. "Most of the time, these geopolitical events are not entirely unexpected. The invasion of Iraq, the Russia-Ukraine conflict, and the bombing of Iran all had warning signs. Therefore, gold had already surged significantly before the events, rising $500 within 8 trading days."
What is the logic behind this? The decline in gold is closely related to the strengthening of the dollar, which is also a safe-haven asset. Additionally, geopolitical crises often trigger liquidity demands...

Why Gold "Fails" During Crises

Gold's performance during geopolitical crises often contradicts most investors' expectations. Adrian Day, after studying geopolitical events over the past 45 years, found that in most negative geopolitical events, gold actually declines. There are three main reasons for this phenomenon:
First, the market usually prices in risk factors before the crisis actually occurs, following the rule "buy the rumor, sell the fact." Take the Iran war as an example: gold had already surged significantly before the war, and after the war actually broke out, it retreated.
Second, the strengthening of the dollar is another key factor. "The dollar is also a safe-haven asset. When geopolitical events happen, people flock to the dollar. In such cases, the dollar had already risen the day before the bombing started, and gold began to decline the day after the bombing, almost simultaneously."
Third, and perhaps most importantly, is liquidity shocks. "In geopolitical events, liquidity demands often arise—whether it's a global liquidity squeeze like in 2008 or regional liquidity shocks like in Iran. When liquidity is needed, gold usually suffers because it is the ultimate source of liquidity."

Multiple Factors Combine to Suppress Gold Prices: Liquidity Pressure and Real-World Choices

Adrian explains, "When people need liquidity, gold is often the first asset they sell because it can be sold. In this event, we see in the UAE and Dubai that gold is actually being sold at a significant discount below global prices because people are selling gold."
He gives an example: "If missiles just hit the Fairmont Hotel, and you want to leave with your family but there are no commercial flights, you have to pay high prices to get your family out, and your gold is locked in a safe. Selling gold and sending your family on a plane is a natural choice."
Host Michelle McCrory questions the idea of gold as the "ultimate form of liquidity," pointing out that physical gold isn't as instantly liquid as digital financial assets. Adrian admits this: "Of course, you're absolutely right. Gold trades 24 hours a day, but if I want to sell physical gold right now, that's impossible. However, on Monday morning, I can go to the bank and find someone to buy it—no problem."
Besides individual investors, central bank gold sales also impact the market. Michelle notes that two weeks after the start of the war, Turkey's central bank sold or swapped about 60 tons of gold, worth roughly $8 billion. Turkey has been one of the most active gold buyers over the past decade.
Adrian considers this very important: "Not only Turkey, but Poland also sold some gold, and Russia as well. Turkey sold nearly 60 tons, which is significant. Last year, all central banks bought about 860 tons in total, so 60 tons is a considerable impact on all central banks."
Rising oil prices also put pressure on gold. Adrian explains, "A sharp rise in oil prices actually harms some of the world's largest gold-buying countries. India and China are major oil importers. Rising oil prices hurt their economies, leaving less money for gold purchases."

The Logic Behind the Strong Dollar

When asked whether there is some form of intervention to suppress gold prices to support the dollar, Adrian applies Occam's Razor: "If I see a simple explanation, I don't need to look for conspiracy theories." He compares the current situation to the 1979 Iran crisis: "In 1979, the US embassy was taken over, hostages were held, and there was a very dramatic and unfortunate failed rescue operation. The perception then was that the US was losing its power and military dominance. What happened? The dollar fell sharply."
He also says, "This time, although the war may not be as quick or smooth as Trump expected, so far it hasn't been a disaster for the US and Israel. The US has clearly demonstrated its strength, and other countries are largely powerless. So, the dollar is rising because the US has shown its dominance and power."
Regarding the future of the dollar, Adrian believes, "If this war ends in disaster for the US, I think it will only accelerate the trend we've already seen of moving away from the dollar. But if it progresses smoothly from the US perspective, I believe it will only delay the inevitable decline of the US as the world's sole reserve currency, which has been ongoing for nearly 25 years."
He points out that the proportion of US dollar reserves held by central banks has fallen from 78% in 2000 to about 48% now. "The reason central banks sell dollars is well known: they dislike concentrating in a single asset, especially one that comes from a government that is reckless with its fiscal policy and willing to weaponize its dominant position."
When discussing US debt surpassing $39 trillion, Adrian believes the US will ultimately reduce or eliminate its debt burden through inflation: "If your debt is too large, you have to eliminate it—either through default (which I don't think the US will openly do) or through inflation. Some think raising taxes to balance the budget can eliminate debt, but the reality is, the debt is so large that you can't raise enough from income taxes to pay it off."

Gold Mining and Investment Opportunities

Regarding the outlook for gold mining companies, Adrian notes, "We entered the mining sector at what might be the most incredible moment at the start of the year: gold prices doubled in 18 months, but their prices and costs remain relatively stable, so profit margins for gold miners have expanded significantly."
He cites research from the Bank of Montreal, which states that on average, every $10 increase in oil prices adds about $2 to the total costs of gold mining companies. "If oil rises from $60 to $100 and stays there, costs increase by 8%. That's meaningful but not devastating. If you're with Agnico Eagle, with gold at $2,500 and all your sustaining costs at $1,327, you can handle an 8% increase without much impact—you still have extremely attractive profits."
For investors considering how to allocate gold mining stocks, Adrian suggests, "If you're 75 years old and 50% of your net worth is in gold mining companies, maybe you shouldn't add more now. But if you're new to this sector, I would recommend allocating at least 50% of your portfolio to gold right now."
When asked about gold price forecasts for the end of the year, Adrian says, "I believe that after the war ends or calms down, when monetary factors and the fiscal issues we've been discussing come back into focus, gold will easily surpass its current all-time high. Give me 18 months, and I believe we'll see $6,000 per ounce."
Regarding silver, Adrian is more optimistic about it but not as much as gold, mainly for two reasons: "First, silver has more industrial use, so demand may decline during a recession. Second, as silver prices rise, industrial users will do what all industrial users do when costs increase: seek substitutes and improve efficiency. You can already see this in solar panels, where the amount of silver in Chinese-made solar panels today is less than two years ago when silver was at $20 and $10."
In conclusion, Adrian emphasizes that investors should develop their strategies based on their financial situation and risk tolerance: "If you're the type who can't accept risk at all, and if a 20% drop in stocks makes you want to sell immediately, then you shouldn't enter this industry because that is usually the wrong approach."

Risk Warning and Disclaimer: The market carries risks; invest cautiously. This article does not constitute personal investment advice and does not consider individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest accordingly at your own risk.