Gold, Bonds and the Iran War Shock

Axel Merk argues gold fell after the Iran war shock because long-end bond yields rose while inflation expectations did not move as much, pushing real yields higher. In that setup, Treasuries become more competitive with gold as a store of purchasing power, pressuring bullion in the near term. The key takeaway is that the move was not driven by higher inflation fears, but by a rates-led repricing: nominal long-term rates sold off, yet the inflation component stayed relatively contained. That combination improved the relative appeal of bonds versus non-yielding gold, even against a geopolitically supportive backdrop. For traders, the signal is that the gold reaction depends less on headline geopolitical risk and more on how the event reshapes real yields and the curve. If long-end yields keep rising without a matching rise in inflation expectations, gold could stay offered; if the shock reverses into lower real yields, bullion should recover quickly.