Recently, with the situation in the Middle East worsening, various views are emerging in the market about how gold prices will move. In fact, it’s not a simple matter—it’s entangled with quite complex factors.

As a basic point, the biggest factors that determine gold prices are the FRB’s monetary policy and real interest rates. Geopolitical risks in the Middle East are certainly attracting attention, but in the end, they are just short-term noise. However, depending on what this “noise” actually is, the market’s reaction can change significantly.

In the stage where the conflict remains confined to a limited area, the typical pattern of “buy on expectations, sell on facts” is repeated. Before the outbreak, investors strengthen their risk-avoidance stance, money flows into gold, and prices rise. But once the war actually starts, the market decides that concerns have been incorporated to a certain extent, making selling more likely.

Looking back at history, in the 1991 Gulf War, gold rose 17% before the war began and fell 12% after it began. In the 2003 Iraq War, gold rose 35% before the outbreak and fell 13% after. The same pattern was also seen in the 2023 Israel–Palestine conflict. In an era when the United States could control the situation militarily, this “rise then fall” cycle was clear.

But this time, the situation is somewhat different. It’s the expansion of the conflict amid a relative decline in U.S. influence. If it spreads to Iran or develops into a blockade of the Strait of Hormuz, it would not just be a geopolitical risk—it would directly lead to an actual energy supply crisis. In that case, gold prices may move in a different way.

In the short term, from April to May, gold prices are expected to trade in a soft range due to the influence of the negotiation process. If crude oil prices rise and trigger inflation concerns, and if the FRB postpones rate cuts, real interest rates will increase and the dollar will strengthen. Then gold—an asset with no interest—would be more likely to be sold.

However, from a medium- to long-term perspective, the situation becomes more complex. In a scenario where the conflict expands fully and the U.S. loses control, two factors work at the same time: inflation hedging and “de-dollarization.” Gold purchases by central banks in each country are also continuing, and if these elements overlap, gold prices could also have a chance to move higher.

There are three key points right now. First is the FRB’s policy stance. Chairman Powell views geopolitical risks as nothing more than noise and prioritizes suppressing inflation. Next is the link between crude oil prices and inflation. If the conflict remains limited, higher oil prices could drive inflation, and with expectations of rate hikes, gold prices are more likely to be suppressed. Finally, it’s the extent of the conflict’s spillover. If the economic order is maintained, gold selling and oil buying would tend to push gold prices downward. But if the situation becomes uncontrollable, gold prices can’t avoid rising.

Historically, gold prices tend to return to pre-war levels within 60 to 180 days after a war. However, this time is a moment when U.S. control is being tested. If it can be controlled, it will follow the usual pattern. If it can’t be controlled, I believe it’s highly likely that gold prices will form new highs amid the flow of geopolitical fragmentation and de-dollarization.