Gold Fell While the War Continued. Here's What Investors Missed.
Gold Fell While the War Continued. Here's What Investors Missed.

Gold Fell While the War Continued. Here's What Investors Missed.

Fri, Aug 21, 2026 10:21 AM

Gold is supposed to go up when people are scared.

So why did it fall nearly 30% this year while a major conflict was still raging?

The answer is surprisingly simple — and it has less to do with fear than most people think.

$5,300+
Gold's record high in January 2026, as US–Iran tensions escalated.
~30%
Gold's decline by July 2026 — even as the conflict continued.
Source: Gold spot price data, verified across multiple market data providers, August 2026

Wait, what happened?

In late January 2026, gold hit a record price above $5,300 an ounce as tensions between the US and Iran kept rising. War, fear, people rushing to something safe – that was the story, and it made sense.

Then gold spent the next six months falling. By July, it had dropped about 30%. The war hadn't ended – if anything, it was still front-page news. So why did gold fall while the fear was still there?

January – Gold hits record high above $5,300
February–July – Falls ~30% despite the conflict continuing
Early August – US jobs and inflation data come in weak
Mid-August – US Treasury announces bigger bond buybacks
August – Gold rallies ~10%, its best month since January

Oh – it's not really about fear

The war pushed oil prices higher. Higher oil makes almost everything cost more – that's inflation. When inflation looks like it's rising, investors expect the US central bank (the Fed) to keep interest rates high for longer.

That's bad for gold. Gold doesn't pay you anything for holding it. Money in a savings account or bonds does, and that payment gets better when rates go up. So when rates look set to stay high, people would rather earn that payment than hold gold.

The surprising part: gold fell while the war continued. Because the war pushed oil higher, which made investors expect interest rates to stay high – and that made gold less attractive.

Then it flipped

In August, US jobs and inflation data came in weaker than expected, a sign the economy was slowing – which meant less reason for the Fed to raise rates. Gold jumped about 10% that month, trading near $4,530 by August 20, its best month since January.

288.9t
Central bank gold purchases in Q2 2026, up 62% year-on-year.
RM157.2m
Poh Kong Holdings' nine-month profit, to April 2026.

The part almost nobody noticed

A bond is basically an IOU – you lend a government money, and it pays you back later with a bit of interest on top.

In mid-August, the US Treasury announced it would buy back more than double its usual amount of long-term bonds. When a government does this, bond returns tend to fall – and when bonds pay less, gold looks more attractive by comparison. Right after the announcement, US yields fell, the dollar weakened, and gold jumped more than 4%.

Worth noting: this move is small next to the overall bond market, and yields crept back up within days – so the boost may not last, and some Fed officials still want to raise rates if inflation heats up again.

Central banks bought a record 288.9 tonnes of gold in Q2 2026, even as prices fell. That kind of buying isn't chasing quick profit, it's closer to a long-term reserve – and it likely helped put a floor under gold's mid-year decline.

What about Malaysia?

A few Bursa-listed companies are tied to the gold business – though gold going up doesn't automatically mean every one of them makes more money.

Poh Kong Holdings Berhad (POHKONG, 5080) is one of Malaysia's largest jewellery retailers, reporting a nine-month profit of RM157.16 million to April 2026, up sharply on gold-linked demand. Tomei Consolidated Berhad (TOMEI, 7230), the other major listed jeweller, saw profit rise 50% in its last full financial year as gold prices climbed. The TradePlus Shariah Gold Tracker, listed on Bursa, moves directly with the spot gold price rather than through a company's earnings.

The catch: Poh Kong's own management has said gold jewellery isn't essential – pricier gold can mean fewer sales, not just fatter margins. A 15-year look at these companies found no reliable link between gold prices and their actual profits over time; the connection shows up mostly in short-term stock moves, not long-term earnings.

What to actually watch

Two dates matter more than any headline: US inflation data on September 10, and the Fed's meeting on September 15–16. Next time a headline says "war is pushing gold higher," check oil, check inflation, then check what investors expect the Fed to do.

This article is for educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Always conduct your own research or consult a licensed adviser before making investment decisions.