Commentary: Gold is seen as a ‘safe haven’ in uncertain times. Why is it crashing amid a war?

WHY AN OIL SHOCK IS DIFFERENT 

Traditional finance textbooks will tell you that when a war breaks out, inflation spikes or stock markets crash, investors typically engage in what’s called a “flight to quality” – fleeing riskier assets and moving their money somewhere seen to be safer (such as gold).

In a 2025 research paper, colleagues and I offer a more nuanced view. Crucially, we incorporated data from more recent periods of stock market turbulence, including the COVID-19 pandemic, where gold’s safe haven properties were more muted.

We found gold is still a go-to choice for investors moving out of riskier investments. But it is not an untouchable storm shelter.

Instead of standing completely separate from the panic during a crisis, gold absorbs some of the volatility from both the stock market and energy markets, which can cause its price to fall.

RIPPLE EFFECTS

Why? For one, market chaos means some large investors may be forced to sell gold to cover other losses or meet financial obligations, such as margin calls (where a lender demands funds to cover the falling value of an asset).

For other large investors, the recent price rally may have created an opportunity to sell high and take profits, or rebalance their investment portfolios.

But there is also the fact gold does not have as much essential intrinsic value as something like oil. There is not much industrial demand for it compared to other commodities.

In a severe crisis, forced to chose between a commodity like oil and gold, what does global industry really need? Oil.