Gold is often viewed as the ultimate safe-haven asset, expected to rally whenever geopolitical tensions rise. For South African investors, however, the outcome is shaped by two variables: the international gold price and the rand-US dollar exchange rate. Rand weakness can enhance local currency returns even when the dollar gold price is subdued, while rand strength can offset gains in bullion.

Despite conflict in the Middle East, global trade fragmentation and intensifying great-power competition over the past year, gold has offered less protection than investors might have expected. At around $4,200 an ounce, it is below its level of $4,320 at the start of 2026 and broadly unchanged from a year ago. The Caldara & Iacoviello Index, which measures the frequency of geopolitical-risk articles in the press over a 30-day moving average, illustrates the disconnect: 100 represents the long-run average and 200 signals extreme stress.

Graph 1: Gold and Geological Risk Index

The primary reason is that geopolitical events do not operate in isolation. They may trigger an initial burst of safe-haven buying, but gold ultimately trades within a broader macroeconomic framework. One of the components of that framework is the price of gold at the time of the crisis. The gold price had peaked on 28 Jan 2026, a long time before the world had inkling of the impending crisis in the Middle East driven by a series of other macro factors. This was potentially one of the reasons that as the Geopolitical Risk Index peaked at 31 March 2026, the gold price did not move higher.

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