Gold Fails as Hedge Amid Iran Crisis
Falling prices raise questions as oil surges; investors urged to rethink gold strategy
GG News Bureau
Mumbai, 14th April: Gold, traditionally considered a safe-haven asset during global crises, is facing renewed scrutiny after failing to deliver expected returns amid escalating tensions involving Iran.
Despite an initial surge following geopolitical developments, gold prices have sharply reversed, falling nearly 20% from their peak and erasing much of their yearly gains. Gold mining stocks have fared even worse, declining by around 25%, while oil prices have surged, emerging as the primary beneficiary of the crisis.
Why Gold Is Under Pressure
Market experts attribute gold’s decline to a combination of rising inflation expectations, higher real interest rates, and a strengthening US dollar—factors that typically weaken demand for non-yielding assets like gold.
Instead of flowing into bullion, investors are increasingly shifting towards cash and dollar-based assets offering better returns and liquidity.
Experts Back Long-Term Case
Despite the short-term weakness, global investors continue to advocate holding gold as a strategic hedge. Billionaire investor Ray Dalio has long recommended allocating 5% to 15% of portfolios to gold, calling it “the safest money” and a key diversifier during market stress.
The current volatility, partly driven by shifting geopolitical signals, including those linked to Donald Trump, has further complicated market behaviour.
Revised Allocation Strategy
According to Senthil Kumar N, MD & CEO of Nitstone Finserv, investors may need to increase their gold exposure in the current uncertain environment.
- Younger investors: 5%–10% allocation
- Older investors: 10%–12% allocation
- Current scenario: Up to 12%–15% recommended
He also emphasised that gold exchange-traded funds (ETFs) and sovereign gold bonds are more efficient than physical gold due to lower costs and reduced risks.
Long-Term Outlook Remains Strong
Canadian investor Pierre Lassonde highlighted gold’s long-term potential, suggesting that even a small shift in global savings towards gold could significantly push prices higher due to limited supply.
While gold’s recent performance may have disappointed investors, analysts maintain that its role as a hedge remains intact over the long term—particularly in an era of policy-driven uncertainty.
