For 107 days, holding gold required patience and conviction. The Iran war that began on February 28 drove gold down from its January all-time high of $5,589 to a seven-month low near $4,070 last week — a punishing 27% decline. Throughout that period, the message from those who understood gold’s structure was consistent: the decline is temporary, the cause is a single identifiable factor, and the resolution will reverse it. This weekend, that resolution arrived. The US and Iran reached a peace deal. The war is ending. And gold has already climbed to $4,325. Everyone who held through the storm was right.
The vindication is worth understanding in full, because it teaches the most important lesson in gold investing. The war suppressed gold through one specific mechanism: the closure of the Strait of Hormuz drove oil to as high as $120 per barrel, which drove inflation to a 4.2% headline rate, which forced the Federal Reserve to stay hawkish and even discuss rate hikes, which strengthened the dollar and suppressed gold. This was a temporary, identifiable, reversible distortion. It was never a change in gold’s fundamental value. The patient holder understood that the distortion would end when its cause ended.
Now the cause is ending. The peace deal reopens the Strait of Hormuz. Trump has ordered the naval blockade lifted. Oil, which fell more than 6% last week in anticipation, is set to decline toward $80 and below. The energy-driven inflation that gripped the economy will fall with it — and because last week’s CPI confirmed core inflation was rising just 0.2% month-on-month, the underlying inflation picture is benign. Remove the oil spike and inflation normalises. The Fed can ease. The dollar weakens. Gold rises.
The structural forces that drove gold to $5,589 in January never disappeared during the war. Central banks kept buying — surpassing 5,000 tonnes of reserves in 2025 for the first time in history, with gold setting 53 record highs that year. Mine supply stayed constrained at 1–2% annual growth. Global debt kept deteriorating. J.P. Morgan, even on the day gold suffered its steepest decline since 1983, reaffirmed its $6,300 year-end target and stated it remained “firmly bullishly convicted in gold over the medium-term.” These forces were always the roots. The war was always just the storm.
The tree bent dramatically this year — further than at any point in the bull market. But it never broke, because the roots were never damaged. Today, with the war ending and gold at $4,325, the tree is straightening. The patient gardener is being rewarded.
