Gold and War: A 50-Year History of Price Surges

Why Gold Excels in Wartime During wars, gold prices typically surge. When conventional investments become too risky due to the uncertainties of conflict, investors turn to gold, which is perceived as having intrinsic value. Wars often lead to increased government spending, inflation, and economic downturns, all of which push gold prices higher. The metal’s track record as a reliable store of value makes it attractive in such situations, as it tends to maintain or increase its worth even when other markets collapse. Recent examples reinforce this trend: Gold spiked following Russia’s 2022 invasion of Ukraine and continued climbing amid escalating tensions between Israel and Hamas in 2023. When conflicts arise, fears of recession and inflation drive investors toward safe havens like gold, boosting its price. Wartime Gold: A History of Surging Prices Looking back at major global conflicts, gold has consistently thrived. From the Soviet invasion of Afghanistan in 1979 to the Iraq War and the recent conflicts in Gaza and Ukraine, gold prices have experienced significant gains. These increases are most pronounced during the onset of wars, when uncertainty peaks, and investors rush to protect their portfolios. For instance, in 2023, after Hamas launched attacks in Gaza, gold quickly rose to $2,000 per ounce, a mark it hadn’t hit in months. This pattern repeats throughout history: wars lead to heightened demand for gold, driving its price upward. Gold's Connection to Inflation and Recession Wars don’t just increase the price of gold directly; they also trigger broader economic factors that contribute to gold’s rise. Inflation, often exacerbated by government spending in wartime, correlates closely with gold’s value. As governments print more money to finance wars, inflation rises, pushing up the price of gold as investors seek assets that hold their value. Recessions, which often follow major conflicts due to inflation and declining consumer spending, also boost gold prices. Historically, gold has outperformed most traditional assets during recessions, as investors look to it as a hedge against economic instability. Why Gold Gains Value in Wartime The mechanics of gold’s price movements during wars are complex, but they largely come down to fear and uncertainty. Wars drive inflation through increased government spending, while also sparking fears of economic collapse. These factors make gold more appealing as a safe, tangible asset. Investors flock to gold, driving up its price. However, not all wars have the same effect on gold. Smaller, localized conflicts may not significantly impact global gold prices, but large-scale, prolonged wars—such as the Iraq War—tend to have a more pronounced effect due to their broader economic implications. The Gold Debate: A Timeless Hedge or a Cyclical Asset? While gold’s track record during wars is impressive, some analysts warn against viewing it as an infallible shield against economic turmoil. Critics argue that 50 years of data might not be enough to claim the reliability of its future performance, pointing out that gold’s behavior has become increasingly tied to economic cycles and interest rates rather than solely to geopolitical conflict. They caution that gold, like any asset, is subject to market forces and may not always perform as expected during crises. However, these criticisms often overlook the core reason why gold has endured as a safe haven for centuries. Yes, gold can be cyclical, responding to broader economic forces. At times of intense conflict and heightened global instability, gold frequently emerges as a reliable asset. It’s not invincible, but no investment is. What gold offers is a hedge—imperfect but proven—against the worst moments of human history. For many, that’s reason enough to keep it in their portfolios, especially when the future looks grim. The Bottom Line Over the last 50 years, gold’s message has been loud and clear: when chaos erupts, gold takes the stage. Conflict, inflation, economic uncertainty—while traditional assets crumble, gold doesn’t just hold the line; it thrives. Whether shielding against inflation or stepping in as a haven when the markets turn hostile, gold has repeatedly proven its worth. No investment is bulletproof, but if history’s any guide, gold stands ready when geopolitical instability sends everything else into a tailspin.