STOCKSTOWATCHTODAY BLOG

The price of gold fell Monday despite rising geopolitical tensions linked to the war in Iran, raising questions about the yellow metal’s status as a haven asset.

Front month Comex gold for March fell 1.1% to $5,091.50 an ounce, according to Dow Jones Market Data. Mining stocks

Newmont

and

Freeport-McMoRan

rose 0.6% and 1.9%, respectively.

Gold has fallen 2.9% since the Iran War began, according to FactSet data. During the same period, the

—which tracks the value of the U.S. dollar against a basket of its major peers—has climbed 1.7%. As gold and the greenback are typically thought of as havens in a crisis, their diverging moves may, at first blush, appear unusual.

Not so for BullionVault researcher Adrian Ash: “The dollar is still king. Its the number one trading currency worldwide. When people shut investment positions in the wake of this type of panic, they need to access dollars,” he told Barron’s in an interview.

Meanwhile: “When a trading book gets hit by this type of shock, it’s not unusual to sell your winning positions to cover your losing positions,” he added, with reference to selling gold.

Another explanation for the divergence could lie in changing expectations around inflation, and therefore interest rates. Surging oil prices may keep interest rates higher-for-longer, which would boost the dollar’s yield while hitting nonyielding assets like gold prices.

Looking ahead, Ash said: “Does gold rally [again] from here if it gets below $5,000? The war has so far caught gold bulls offside. But it is perfectly possible that gold starts to turn around the longer the crisis persists.”

Write to Alex Kozul-Wright at alexander.kozul-wright@barrons.com