Gold Fails the Safe Haven Test Again

War, what is it good for? Not gold, apparently. Nor is inflation. As we pointed out in last Thursday’s Headlines section, gold has been faltering and recently surpassed the bear market threshold (down -20% from a high) after an early-year boom. In our view, gold’s year-to-date performance torpedoes its reputation as a hedge against almost anything.

Gold was riding high entering the new year. It closed 2025 at $4,368 per troy ounce—near record highs—which inspired forecasts of $5,000 in 2026.^[i] That optimism appeared well-founded after the precious metal hit an all-time high of $5,405 on January 29.^[ii] But after a bouncy February, gold has slid since March, not long after the war in Iran erupted. Last week, gold entered bear market territory despite economic jitters flaring and inflation heating up again. In contrast, global stocks rose over the same stretch, highlighting a basic long-term truth: Gold is more volatile than stocks.^[iii]

But isn’t gold supposed to be a “safe haven” when uncertainty and inflation pick up? If so, bullion is doing a poor job. While there is no foolproof way to measure uncertainty, headlines provide a good indication. The Iran war, which has featured multiple attempts at purported ceasefires. A mini-correction in stocks. Upheaval in global energy markets, from the restricted Strait of Hormuz to the United Arab Emirates’ quitting the OPEC cartel. The ongoing war in Ukraine. Questions about China’s Taiwan ambitions. Inflation ghosts returned, too, with prices perking short term due to energy costs and fears they will heat more. Conventional wisdom suggests this is when gold should shine. Instead, it has pulled back sharply, leaving it flattish year to date and down -19.4% from its January 29 high after a slight recent bounce.^[iv]

Exhibit 1: An Uncertain 2026 Hasn’t Favored Gold

Source: FactSet, as of 6/15/2026. Gold spot price, 12/31/2025 – 6/15/2026.

Headlines say gold is struggling because some central banks are raising rates and others may soon follow suit. However, periods of hot inflation (and, sometimes, uncertainty)—which are supposedly beneficial for gold—usually come with rising rates. Go back a few years, when the Fed hiked the fed-funds target range from 0.0% - 0.25% to 5.25% - 5.50% between March 2022 and July 2023. US CPI had been speeding since early 2021 (and peaked in June 2022 at 9.0% y/y) while a cornucopia of uncertainties, from the war in Ukraine to fears over energy shortages, weighed on investors.^[v] Gold didn’t thrive in that 2022 environment, falling as much as -20% from March 8 – November 3.^[vi] During the Fed’s 2022 – 2023 hike cycle, gold delivered a 1.7% return, trailing global stocks’ 5.8%.^[vii]

So the argument itself unknowingly acknowledges gold isn’t a hedge against rising prices and scary unknowns. Note, too, gold’s historical performance is all over the place. The Fed hiked rates from June 2004 – June 2006—when gold prices rose.^[viii] When the Fed cut rates from July 1990 – September 1992, that supposed “support” didn’t boost bullion prices, which largely drifted downward throughout the late 1980s – 1990s.^[ix]

Remember what gold fundamentally is: a commodity with basically no industrial use and little physical demand outside jewelry, rendering sentiment its primary demand driver. Strip away the shiny veneer to see what gold doesn’t do for investors. It doesn’t pay a dividend, generate earnings, buy back its own stock, invest in new product lines or acquire companies to expand market share. And unlike other commodities, gold tends not to move in long supercycles as high prices encourage investment in new mines that eventually overshoots, turning a supply shortage into a glut.

So gold’s price growth depends largely on how investors feel about it. Feelings are fickle and unpredictable, which is why short-term stock market volatility is impossible to time. If you can’t time stocks’ short-term ups and downs (and we aren’t aware of anyone who has, as they would be a living legend), we reckon you won’t get far with gold, either.