Gold at the dawn of a major geopolitical change

Sticking to a few days of trading to settle the debate would be an analysis error.

Since the beginning of the year, the momentum of the gold price provides material for all discussions. The skeptic will be quick to point out the correction recorded at the time of the Israeli-American intervention in Iran, while the optimist will remind that with an 8% increase in the first quarter alone, gold was among the best-performing asset classes, including the decline. However, sticking to a few days of trading to settle the debate would be an analysis error.

Profit-taking and liquidity: what explains the March correction

To understand the real mechanisms of this volatility, one must look from the perspective of the World Gold Council. According to the institution, the March correction is explained by a massive sale of gold ETFs, a sign of profit-taking after the surge in January and February, coupled with a search for liquidity and a closing out of leveraged positions. These sales were particularly pronounced in Europe and the United States, while Chinese investors continued to buy. Better yet: China has never acquired as much physical gold, bars, and coins combined, as in the first quarter of this year. A revealing dichotomy of geopolitical ruptures in the making.

Iran: a long-term catalyst for the yellow metal?

Beyond short-term noise, the Iranian conflict could constitute a lasting turning point. A study published at the end of 2025 by Arslanalp, Eichengreen, and Simpson-Bell for the National Bureau of Economic Research (NBER) sheds light on this phenomenon. The authors first note a structural fact: gold has now supplanted the euro as the second reserve asset of central banks worldwide. China, India, Turkey, and Poland are among the most diligent buyers in recent years.

Their analysis also points to a clear link: the closer a country’s economic ties are to Washington, the higher the dollar’s share in its reserves. In particular, according to Arslanalp, Eichengreen, and Simpson-Bell, geopolitical alignment with the United States, measured by the existence of a defense pact with the United States, increases dollar reserves. Conversely, greater independence of central banks is associated with a weaker holding of dollars. However, the Iranian conflict risks precisely eroding this bond of trust. Europe seeks to establish a common defense free from American oversight. Gulf countries have endured a conflict they did not want. As for the BRICS, they have no reason to align with the current administration’s policies.

In this context, Deutsche Bank published by the end of April an analysis with striking projections. Its strategists estimate that the central banks of emerging countries, with China at the forefront, hold between 15% and 20% of their reserves in gold, a proportion steadily increasing over the past fifteen years. According to their analysis, based on constant reserves (around $8 trillion today for emerging countries), three scenarios emerge: $4,000 per ounce if the share of gold falls to 15%, $5,300 if it approaches 20%, and up to $11,600 in the hypothesis that the share of gold in the reserves of emerging countries returns to its historical average of 40% over 75 years.

The post-strike correction in Iran that gold experienced does not diminish its relevance in the face of the geopolitical changes we are facing. On the contrary, by exacerbating tensions between blocs and fueling American isolationism, this conflict could, paradoxically, be one of the most powerful long-term support factors for gold. Gold may not be done surprising us.

[Context: The article discusses the various factors influencing the gold market, including recent geopolitical events and central banks’ gold reserves.]

[Fact Check: The sources cited in the article are real studies conducted by reputable institutions.]