Gold and silver retreat despite inflation and war in the Middle East

Usually, when cannons roar and inflation surges, gold and silver advance like protected kings on the global financial chessboard. This time, the scenario seems to have been rewritten by an invisible hand. Despite tensions between Iran and the United States, despite the surge in oil prices and despite prices remaining high, both precious metals retreat heavily, leaving investors and analysts facing a rather puzzling situation.

When traditional safe havens suddenly abandon their role

Since January, gold has lost about 23% of its value after peaking at 5,608 dollars an ounce. Silver has suffered an even more brutal correction, dropping 44% after a peak above 121 dollars. Yet, the historic ingredients for a rally were well present. The war between Iran and the United States disrupted the Strait of Hormuz. Oil surpassed 90 dollars. American inflation reached 3.8%.

Bull Theory perfectly summarizes this anomaly:

The assets that the whole world buys to protect themselves from war and inflation did exactly the opposite of what they were supposed to do. Every safe haven buyer was perfectly positioned.

Bull Theory, X

For several observers, the problem no longer comes from geopolitics. The market now seems to fear interest rates more than missiles. Like in a chess game where the queen becomes vulnerable, gold temporarily loses its automatic shelter status.

Kevin Warsh disrupts the gold market calculations

The real turning point came from the United States. In May, the American economy created 172,000 jobs versus only 85,000 expected. This report completely changed monetary expectations.

Kevin Warsh, installed as head of the Fed on May 22, inherits a particularly complex chessboard. Markets now anticipate a probability of a rate hike reaching 72% before the end of the year according to FedWatch.

Reuters reports Kelvin Wong’s remarks:

Everything rests on the aggressive pivot that markets are beginning to price into Fed futures. Higher bond yields are also putting additional pressure on gold.

Reuters

Consequently, bond yields rise and strengthen the dollar. Gold, which produces no yield, becomes less competitive. Several market participants even believe that investors are selling their metals to quickly get liquidity. 

Others mention a massive repositioning towards sectors linked to artificial intelligence, now considered the new locomotives of global capital.

Liquidity, bitcoin and markets: the real battle is elsewhere

This correction far exceeds the precious metals market. On Friday, all financial assets wobbled. The S&P 500 lost nearly 2 trillion dollars in market capitalization in a single session. AI-related stocks wiped out more than 1 trillion dollars.

Bitcoin has also been under intense pressure. Several analysts point out that investors are now primarily seeking liquidity. The logic looks more like a surgical operation than a simple portfolio arbitrage.

Astik Mondal summarizes this idea: “When assets designed to protect you fail precisely in this scenario, it is not the hedge that is broken. It is the playbook.”

Markets thus seem to rewrite their rules. Between giant IPO projects, AI financing needs, and expectations of higher rates, each piece changes position at high speed.

Numbers that sum up the upheaval

• Gold down approximately 23% since January 2026;
• Silver sharply down 44% since its peak;
• US inflation held around 3.8% year-over-year;
• US employment report: 172,000 jobs created versus 85,000 expected;
• BTC price at time of writing: 62,783 dollars.

Gold and silver are therefore no longer the only ones to falter. In the crypto market, bitcoin has also just erased all gains accumulated since Donald Trump’s re-election. When safe haven assets stumble and the queen of cryptos retreats, the entire investors’ compass seems to lose its north.