Gold Seeks Safe-Haven Status Amid Geopolitical Risk and Inflation Fears

Gold's behavior during the recent U.S., Iran conflict has been unusual. Instead of rising in response to escalating military risk, the price of gold actually fell. This was because higher oil prices and expectations of tighter Federal Reserve policy outweighed the safe-haven effect.

The inflationary consequences of war were a major concern for investors. Higher oil prices strengthened expectations that the Fed could raise interest rates, increasing the opportunity cost of holding non-yielding assets like gold.

However, with the July Federal Open Market Committee meeting now behind us, geopolitical demand is starting to influence bullion again. The market has given gold some space to react before policymakers meet again in September.