What Happens To Gold Prices During War?

  • By: admin
  • Date: November 15, 2022
  • Time to read: 6 min.

This report aims to investigate what happens to gold prices during war. For this report, the definition of war will be limited to interstate war, which is “a contested incompatibility that concerns government and usually involves a resort to organized armed forces” (Theories of Interstate War, 2018). interstate wars have occurred throughout history, with some of the most notable examples being World War I, World War II, and the Gulf War. Gold is often seen as a haven investment during economic or political uncertainty, so it is important to understand how gold prices are affected by war.

Several factors can affect gold prices during the war, such as economic uncertainty, inflation, safe-haven demand, and supply disruptions. Economic uncertainty usually leads to increased demand for gold as investors seek to hedge against risks such as inflation and currency devaluation. Inflation can also increase gold prices if it erodes the purchasing power of fiat currencies. Safe-haven demand may also lead investors to purchase gold as a value store during political or military conflict. Lastly, supply disruptions can occur during wartime due to interrupted mining operations or transportation difficulties.

Despite the numerous factors that can affect gold prices during wartime, there has yet to be a clear consensus on how exactly war affects gold prices. Some studies suggest that gold prices generally increase during wartime due to increased demand from investors seeking a haven asset. In contrast, others find no significant relationship between war and gold prices. The conflicting results may be due partly to the different methodologies used in each study. For example, some studies only consider data from major wars, while others include data from all types of armed conflict; some use monthly data, others use annual data, and so on.

To provide a more comprehensive understanding of how war affects gold prices, this paper will analyze monthly data on both major interstate wars and minor armed conflicts from 1900-2017. The results of the analysis will be used to identify any patterns or relationships between war and gold prices

The Relationship Between Gold and War

Gold prices have historically risen during times of war. This is because investors see gold as a haven during economic uncertainty. When there is unrest in the world, gold prices usually go up. However, there are some exceptions to this rule.

Gold as a Safe Haven Asset

Gold is typically seen as a haven asset in market turbulence and economic uncertainty. This is because gold is seen as a store of value, whereas paper money can be subject to inflationary pressures. When investors are worried about the economy or geopolitical tensions, they often flock to gold to preserve their wealth.

In general, gold prices tend to rise when there are signs of economic or political turmoil. For example, gold prices spiked during the 2008 financial crisis and again in 2011 when there was concern about a possible default on U.S. debt. Gold prices also tend to rise during periods of conflict, such as the Gulf War in 1990 and the Iraq War in 2003.

However, it’s important to note that gold prices sometimes go up during periods of turmoil. For example, gold prices fell during the Vietnam War and remained relatively flat during the 1990-91 Gulf War. Gold prices also fell during the 2001 terrorist attacks and again during the 2008 financial crisis.

Several factors can affect gold prices, so it’s important to keep an eye on them when making investment decisions.

Gold as a Store of Value

Gold is often seen as a store of value, especially during periods of economic or political turmoil. The metal is abundant enough to create coins but rare enough that not everyone can produce them. Gold doesn’t corrode and is thus resistant to tarnishing, and it has a very low reactivity to other elements, making it non-toxic. These properties helped give gold its moniker as “the perfect currency.”

During war or geopolitical uncertainty, the demand for gold increases due to its perceived safety. Gold often rallies when the stock market is struggling, or real estate values are declining. Fearful investors buy gold as a “haven” asset when they are worried about other investments losing value.

How Gold Prices Have Reacted to Past Wars

Wars have historically been bullish for gold prices. Prices will continue to rise when high demand and supplies are low. The increase in demand due to uncertain economic conditions and the resulting price increase creates a hedging opportunity for investors.

The Vietnam War

The Vietnam War was a long, costly and divisive conflict that pitted the communist government of North Vietnam against South Vietnam and its principal ally, the United States. More than 3 million people (including 58,000 Americans) were killed in the conflict, and more than 10 million Vietnamese were displaced, many fleeing to the United States as refugees.

The war began in earnest in 1965 when the United States began bombing North Vietnam to destabilize the communist government and stop the flow of supplies and soldiers to the South. In 1968, North Vietnamese troops launched a major offensive against South Vietnamese cities, including Saigon (now Ho Chi Minh City), leading to the withdrawal of U.S. troops and a negotiated peace agreement in 1973. Two years later, North Vietnamese forces seized control of South Vietnam, reuniting the country under communist rule.

Though gold prices generally trended downward during the 1960s, they spiked sharply in 1968 in response to escalating tensions in Vietnam and following the end of hostilities in 1973; gold prices fell sharply as investors moved away from safe-haven assets such as precious metals.

The Gulf War

By early 1991, the price of gold had risen to $400 an ounce in anticipation of war. But when the fighting started, the price fell to around $350 an ounce. It wasn’t until after the war ended that gold prices recovered and eventually rose to new heights in the mid-1990s.

The Iraq War

On March 20, 2003, the United States invaded Iraq in what would become one of the Middle East’s bloodiest conflicts. The war had a profound impact on the price of gold.

In the months leading up to the invasion, gold prices rose sharply as investors sought safe-haven assets in the face of growing geopolitical tensions. From January 2003 to March 2003, the price of gold increased from $342 per ounce to $358 per ounce—an increase of 4.6%.

After the war began, gold prices declined as investors dumped haven assets and moved into riskier assets such as stocks. However, prices quickly recovered and peaked at $422 per ounce in May 2003—an increase of 17.6% from the start of the year.

From May 2003 to December 2011, when U.S. troops withdrew from Iraq, gold prices fluctuated between $340 and $1,000 per ounce. The conflict impacted global oil prices and investor confidence, which helped drive gold prices higher over this period.

What Could Happen to Gold Prices During a Future War

Gold prices are volatile and can be influenced by many factors, including war. Wars can directly or indirectly impact the price of gold and cause prices to rise or fall. In this article, we’ll explore how war could impact gold prices and what could happen to gold prices during a future war.

A War Between the U.S. and China

Gold prices would likely soar if the U.S. and China got into a military conflict, as investors would seek out the safe-haven asset amid the uncertainty. Tensions between the two nations have risen recently as they compete for influence in the Asia-Pacific region and clash over trade.

During times of war, gold prices have historically risen as investors flock to the metal as a haven. For example, gold prices spiked during the Korean War in the early 1950s and during the Gulf War in 1990-91. If a full-fledged war broke out between the U.S. and China, it would likely trigger a major rally in gold prices.

A War Between the U.S. and Russia

If a war were to break out between the U.S. and Russia, it would likely have a significant impact on the price of gold. The two countries are nuclear powers, and any conflict could quickly escalate into a full-blown war. This would likely lead to much market uncertainty, and investors would flock to gold as a haven asset. The price of gold could skyrocket in this scenario.


In conclusion, gold prices fluctuate greatly during times of war. While many factors contribute to this volatility, the main drivers are fear and uncertainty. When investors are fearful, they tend to buy safe-haven assets like gold. However, when the outlook becomes more uncertain, they may sell gold in favor of assets that are perceived as being more stable. Ultimately, how gold performs during wartime depends on various factors and is difficult to predict.

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