So, the short answer to the question of how the Iran war is affecting the gold price is: volatility.
Since the war in Iran began last weekend, the gold price has traded in a wide range between about US$5,000 and $5,400 per ounce.
Over the past two years, gold has benefited from a structural change in central banks diversifying their reserves away from the US dollar.
The gold price has also risen due to safe-haven demand amid US tariffs that have destabilised global trade and geopolitical uncertainty.
With a new war upon us, gold's safe-haven appeal is obviously enhanced.
However, the war is likely to have far-reaching economic effects that will impact interest rates, with a flow-on effect to the gold price.
The key concern is that higher oil and gas prices will inevitably lead to higher inflation.
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Likely economic outcomes of the Iran war
So far, the war has pushed oil prices up 17%. Natural gas prices in the UK, Europe, and Germany have also skyrocketed 35% to 60%.
These price spikes are a big problem because every national economy on Earth runs on energy. Without it, industry shuts down.
Oil and gas supply shocks mean businesses running machines to make products, or those transporting products, face higher costs.
This will inevitably flow through to prices — not just at the petrol bowser, but also on supermarket shelves and everywhere else.
This will stoke inflation, and right now, that will mean higher interest rates in Australia and delayed rate cuts in the US.
Neither is helpful for gold.
Interest rates impact the gold price because gold bars yield nothing, but simple cash savings accounts and government bonds do.
When rates fall, gold looks more appealing. Expectations of imminent cuts in the US have been supporting gold in the new year.
Today, analysts at Trading Economics said:
Higher oil and gas prices have revived inflation concerns, prompting traders to delay expectations for easing by the Federal Reserve, with a first cut now seen in September and two reductions still priced in for 2026.
Gold price volatility here to stay, says expert
Peter A. Grant, Vice President and Senior Metals Strategist at Zaner Precious Metals, said the gold price has been volatile all week.
In a blog, Grant commented:
Initial gains on Monday saw five-week highs above $5,400.
However, selling interest emerged on Tuesday as rising concerns about oil prices – and broad inflation – weighed on Fed easing expectations.
The dollar followed yields higher and gold ended the day down more than 4%.
The gold price closed at US$5,390.45 on Monday, US$5,267.60 on Tuesday, and US$5,131.09 on Wednesday.
So far this week, Grant said tests below the 20-day moving average of US$5,068.27 per ounce for the gold price could not be sustained.
Today, the gold price is US$5,182 per ounce, up 0.9% today, down 0.2% over the week, and up 20% in the year to date (YTD).
Where to next for gold?
For now, Grant said the US$5,000 per ounce 'support zone' for the gold price is still in play.
A modestly more favorable tone is evident midweek as the trade assesses the most recent war developments and the yellow metal is consolidating in the lower half of this week's more than $400 range.
Grant said the underlying fundamentals for gold remain supportive, but there will be more volatility ahead as the war continues.
Bulls will be quick to take profits on rallies, and look for limited risk opportunities to buy on dips.
I'm not catching any longer-term bearish vibes out there, but sellers will absolutely step in when the right opportunity presents itself.
The gold price reached a record high of US$5,595.02 per ounce in January before an end-of-month rout.
The rout was triggered by the US President's Fed Chair pick, which inspired investors to take profits on gold after a 65% rise in 2025.
