Gold Has Struggled Since The U.S.-Iran War Began. Is it Still a Safe-Haven Asset?

Gold (XAUUSD) has fallen by over 10% since the onset of the U.S.-Iran war, disappointing investors who held on to it for its status as a safe-haven asset.

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Since then, interest rate cut odds have plummeted as surging oil prices risk raising inflation. Gold tends to benefit from lower interest rates, as the opportunity cost of owning it relative to interest-bearing assets, like U.S. Treasuries, is less. “This has overshadowed its safe-haven status and reduced its effectiveness as a hedge against both geopolitical and inflation risks,” said Amy Gower, a Metals & Mining Commodity Strategist at Morgan Stanley.

Gold’s Safe Haven Status Persists Despite Rate Sensitivity

Gold is a still very much a safe-haven asset. At the same time, the precious metal is extremely sensitive to monetary policy expectations.

Morgan Stanley expects gold to reach $5,200 per troy ounce during the second half of the year, implying upside of 9% from current levels. The firm also forecasts rate cuts in January and March of 2027, which could lift gold even further.