How the War Moved Gold & Silver. Is the Detour Finally Ending?

Ved Shah

Ladies and gentlemen, The Australian Gold Weekly Review returns with another episode as precious metals enter one of the most important turning points of the year.

Most investors assumed a major Middle East war would send gold sharply higher. Instead, the opposite happened.

When the United States and Israel launched strikes against Iran, many expected gold to rally. But Iran's response changed the equation. The closure of the Strait of Hormuz sent oil prices sharply higher, triggered fresh inflation fears, and forced markets to reassess the path for interest rates.

That became the key mechanism driving the precious metals market.

The war did not simply create geopolitical risk. It created an inflation shock. Higher oil prices raised input costs, lifted consumer inflation expectations, strengthened the US dollar, and increased the chance that the Federal Reserve would keep policy tighter for longer.

That is why gold fell from around US$5,600 to nearly US$4,100. Not because the structural case for gold had disappeared, but because the war accidentally made the Fed more hawkish.

This week, that headwind finally started to ease.

The United States and Iran have signed a MoU framework, with the Strait of Hormuz reopening and oil prices falling as markets reassess the inflation outlook. Gold initially rallied to around US$4,336 per ounce, while silver gained more than 4%, as investors priced in lower energy-driven inflation risk and reduced rate-hike fears.

But the recovery has not been straightforward.

Kevin Warsh's first Federal Reserve press conference delivered a cold shower for markets. While rates were held steady, Warsh stressed price stability, refused to offer clear forward guidance, and kept policy firmly data-dependent. Gold and risk assets pulled back after the press conference as investors realised that the Fed may remain cautious even as the war begins to wind down.

That push-pull dynamic now defines the market.

On one side, the Iran deal is positive for gold because lower oil prices ease inflation pressure and reduce the need for further rate hikes. On the other side, Warsh's hawkish tone, a stronger US dollar, and persistent inflation risks continue to cap how quickly gold can recover.

Brian breaks down why this matters so much for investors.

The key question is whether the war-driven headwind for gold is now starting to reverse. Oil flows through Hormuz are expected to recover gradually, but not instantly. Goldman Sachs expects flows to return to only around 70% of pre-war levels, which means inflation relief may come slowly rather than all at once.

That gives the Federal Reserve room to remain cautious. It also means gold may consolidate before making its next major move.

Yet the deeper structural case remains intact.

Central banks continue to buy gold. Sovereign debt concerns remain elevated. De-dollarisation continues to support long-term demand. Major institutional forecasts from Goldman Sachs, JPMorgan, Morgan Stanley and UBS remain bullish for year-end gold prices.

In other words, the bull market thesis did not break. The war created a detour. That detour may now be ending.

And that is exactly where this week's discussion begins.

Did gold's fall from US$5,600 to US$4,100 mark the end of the bull market, or did the market simply misread a temporary inflation shock caused by war? Brian explains the mechanism, the ceasefire impact, the Warsh factor, and what investors should watch over the next 60 days. Please see our no financial advice disclaimer at the end.