Is now a good time to invest in gold?
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Despite gold being prized among some investors because of its qualities as a store of value and a hedge against global instability, the tumultuous geopolitics of 2026 put the brakes on what had been a promising gold rally.
Gold enjoyed its best year since 1979 last year. The price of gold rose 64% through 2025, and kept going early in 2026, hitting an all-time high of $5,595 per troy ounce on 29 January.
But despite its safe haven appeal, gold prices fell as war broke out in Iran – and haven’t recovered since.
Between 27 February, the last trading day before the Iran war started, and 13 July, the price of gold fell 24.2%.
Why has gold sold off like this, just when the kind of turmoil it is supposed to protect against is at its worst? And with that in mind, is gold still a good investment – or is it time to trim your gold holdings?
Why has the gold price fallen?
The point of safe haven assets is to provide a source of liquidity when it is needed.
As stock markets fell through the course of the Iran war, people of all types – traders, investors, and everyday consumers – cashed in what they could in order to cover the shortfall.
Gold was a prime candidate. It is a highly liquid asset, and its rapid gains last year and early in 2026 meant that there were profits to be made from selling it.
In the run-up to reaching all-time highs around $5,600 in January, a troy ounce of gold gained around $1,000 in about a month. “Normally, it takes years to gain $1,000 on gold,” said Nitesh Shah, head of commodities and macroeconomic research at asset manager WisdomTree.
A selloff from what Shah calls January’s “unsustainably high levels” had begun in February, but the fallout of the Iran war accelerated this.
“A traditional phenomenon in geopolitical shock events is that usually, when a shock event happens, gold prices initially fall,” said Shah. This happened after various historical stock market crashes, including 9/11 and the global financial crisis in 2008.
“The mechanism here is that gold is a liquid, cash-like investment. When there is stress in the market, people need to unlock that liquidity,” said Shah.
The impact of interest rates on gold prices
Gold prices are also being weighed on by higher US interest rate expectations in the wake of the conflict. The Federal Reserve (Fed) – the US’s central bank – had been engaged in a steady rate-cutting cycle in the run-up to the war, but the inflationary shock that followed has stalled this trend.
The Fed held rates steady at its April and June meetings, and some experts now believe it may be forced to start raising interest rates.
Higher interest rates are negative for gold’s price performance. And new research from physical gold custodian BullionVault suggests that precious metals investors believe interest rates are currently acting as the primary driver of gold price movements.
BullionVault’s latest investor survey of 953 precious metals investors revealed that 28% think monetary policy will have the biggest impact on precious metals prices in the second half of 2026.
“That’s quite a shift in thinking from the past two years, when Trump’s election campaign, victory and return to the White House threw geopolitics into the spotlight,” said Adrian Ash, director of research at BullionVault. “Gold has long been seen as the asset that rallies on crisis, yet investors today say it’s monetary policy that matters most.”
Is there a buying opportunity for gold?
The big question is how this affects the investment thesis for gold, particularly its status as a safe haven.
While short-term headwinds like a stronger dollar and higher bond yields have worked against gold prices, longer-term structural drivers that have driven higher gold prices remain intact.
“I don’t think that, behaviourally, gold is broken,” said Shah. “If gold is supposed to be a highly liquid asset, then it’s doing its job.”
This optimism is reflected in the results of BullionVault’s survey, which was conducted between 27 June and 7 July. When asked their year-end expectations for the gold price, the average investor’s response was $4,665 – 16.6% higher than the 13 July close price.
“Rather than seeing [the recent pullback] as evidence that bullion has lost its safe-haven appeal, most simply see investors banking profits after a remarkable run, alongside markets adjusting to changing expectations for monetary policy,” said Ash.
The gold landscape today is characterised, relatively speaking, by broader sources of demand than in the past: Chinese insurance companies and Indian pension funds have become eligible gold buyers since the start of last year, while the rise of gold-backed tokens like Tether gold mean that digital asset managers are now buying up gold in large quantities.
All of that suggests that the recent selloff could constitute a buying opportunity for would-be gold investors.
“When prices fall this much, it’s a good time to buy, especially if you were considering buying in the months prior to that,” said Shah.
Gold for diversification
One of the most compelling arguments for investing in gold is the diversification that it can offer to a portfolio.
“When bond yields stand at higher levels, shares and fixed income investments tend to track each other higher and lower,” says Tom Stevenson, investment director at Fidelity International. “That reduces the incentive to own a mixture of both bonds and shares. And it means that investors need to look further afield, into commodities and property, to gain that portfolio balance.”
Gold, by contrast, has “low-to-negative correlation to equities”, according to Raymond Backreedy, chief investment officer at Sparrows Capital.
An allocation to gold within a portfolio can therefore act as a source of diversification during certain market conditions.
When building multi-asset portfolios, “we typically allocate 3-10% [to gold] using the gold ETCs available on the market, depending on user case and overall percentage allocated to the defensive asset class”, said Backreedy.