What’s happening to the gold price?
The Middle East conflict caused the gold price to fall from early March, but gains earlier in the year mean that gold still gained in the first quarter.
Gold prices gained 8.3% during the first three months of 2026, despite selling off substantially during March as the conflict in Iran prompted selling in search of liquidity.
This is despite a fall of 11.5% during the month of March.
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While gold is typically viewed as a safe haven during times of crisis, its gains during 2025 (the best year for gold prices since 1979) meant that global investors sold off gold holdings as a ready source of funds when other assets fell in the light of the conflict breaking out.
“Most markets [have] been negatively impacted over the last month, with even gold – typically seen as a safe haven in a crisis – hard hit,” said Jason Hollands, managing director at investment platform Bestinvest.
Last year was the best year for gold price gains since the 1970s, and the price of gold made a strong start to 2026, registering its all-time high of $5,600 on 29 January.
“Gold is often considered to be a haven in troubled times, but what many people don’t realise is that its price can still drop in a falling market,” said Dan Coatsworth, head of markets at AJ Bell. “Investors often sell what they can in the face of trouble, and gold is a liquid asset.”
In light of the impact of the war in Iran, can gold prices rally further this year, or are more falls in store?
Why have gold prices fallen since the outbreak of the Iran war?
There are several reasons why the gold price has fallen.
Gold is a liquid asset that has seen spectacular gains over the past year. In an environment where all assets (besides oil) are falling, investors may sell off assets that have recently risen in value as they will be able to secure a profit on them.
There are more technical reasons, too. Gold is priced in dollars, and had therefore been benefitting from a weaker dollar prior to the outbreak of the war.
Counterintuitively, though, the conflict has seen the value of the dollar rise in relation to other currencies – largely because the US is a net exporter of oil and is therefore a potential beneficiary of rising oil prices relative to other countries.
Greater inflationary expectations are now feeding through into central bank policymaking. On 19 March, the Bank of England’s Monetary Policy Committee held UK interest rates at 3.75%, having been widely expected to cut rates before the war broke out.
The Federal Reserve (Fed) also held US interest rates at its meeting the same week, and is forecasting just a single rate cut this year. Hawkish central bank policy, particularly in the US, is typically a negative for gold prices.
“Essentially, the opportunity cost of holding gold is mounting,” said Susannah Streeter, chief investment strategist at Wealth Club. “As government bonds, in particular Treasuries, see yields rise, it makes gold less attractive given that gold pays no interest.”
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How could the Iran war impact gold prices in the long term?
The future trajectory of the gold price depends on how long the conflict lasts, and broadly what happens to the global economy as a result.
If the oil price remains elevated, it could materially impact global inflation. Normally, that would be beneficial for gold prices, though if this coincides with further strength in the dollar then that impact could be mitigated.
If the conflict prompts central banks to hold or reverse the interest cutting cycles that most had been enacting then this could be a headwind for gold prices (higher rates are typically a negative for gold, as they increase the relative appeal of alternative defensive assets like bonds).
Think you know your gold? Test your knowledge in our gold quiz here.
How to gain exposure to gold prices
If you are considering where to invest in Q2 and want to add some gold exposure, there are three main approaches.
The first one is investing in the metal itself through a financial contract, such as an exchange-traded fund (ETF) or exchange-traded commodity (ETC).
See our article on the best gold ETFs for more information.
You can also get indirect exposure by investing in the miners that dig gold out of the ground. This can be done by investing directly in their shares, or by buying a gold fund or investment trust.
Lastly, you can buy physical gold bars or gold coins.
In terms of how much gold to hold in a portfolio, Tom Stevenson, investment director at Fidelity International, suggests around 5-10% is a good amount – which is about the same as you might hold in cash.
“The two offer insurance and dry powder to complement the growth and stability of the shares and bonds that make up the bulk of a balanced portfolio,” he says.
