The dawn of a major geopolitical change

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

Since the beginning of the year, the dynamics of the gold price have given material to all discussions. Skeptics will quickly point out the correction recorded at the time of the Israeli-American intervention in Iran, while optimists will recall that with an 8% increase in just the first quarter, gold was among the best-performing asset classes, including a decline. But sticking to a few days of trading to settle the debate would be an analysis mistake.

Profit-taking and liquidity: what explains the March correction

To understand the real drivers of this volatility, one must look at it through the lens of the World Gold Council. According to the institution, the correction in March is explained by a massive sell-off 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 marked in Europe and the United States, while Chinese investors continued to buy. Moreover, China has never acquired as much physical gold, including bars and coins, as in the first quarter of this year. A revealing dichotomy of geopolitical fractures at play.

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

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

Their analysis also points to a clear connection: the closer a country’s economic ties with Washington, the higher the share of dollars 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 lower dollar holdings. However, the Iranian conflict may precisely erode this trust link. Europe aims to build a common defense independent of American oversight. The Gulf states have experienced a conflict they did not want. As for the BRICS countries, they have no reason to align with the current administration’s policy.

In this context, Deutsche Bank published an analysis in late April with striking projections. Its strategists estimate that central banks of emerging countries, with China leading the way, now hold between 15% and 20% of their reserves in gold, a proportion steadily increasing over the past fifteen years. 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 if the share of gold in the reserves of emerging countries returns to its historical average of 40% over 75 years.

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

(Note: Fact check on the study references provided in the footnotes, 1 and 2)