Gold, Bonds and the Iran War Shock
VRIC Media Jul 2, 2026
Summary
Gold came under pressure after the Iran war shock as real long-term yields rose and bonds became more competitive stores of value.
Merk notes markets priced the Iran war as a shock, not a structural change, leaving long-term inflation expectations unchanged.
Gold competes with bonds as a store of purchasing power; when real yields rise, bonds become more competitive and gold weakens.
The speaker notes the gold move happened to correlate with how equity markets reacted to the same shock.
Axel Merk's takeaways
- Top takeaway Merk argues the Iran war shock pushed real long-term yields higher — bonds sold off while long-term inflation expectations stayed unchanged — making bonds more competitive with gold as a store of purchasing power and pressuring the gold price.
- He emphasizes the war was priced as a shock rather than a structural change, which is why long-term inflation expectations did not move.
- In his view, gold competes with the purchasing power of the currency, so when the market prices in more relative long-run compensation from bonds, the price of gold goes down.
- He notes gold's reaction happened to be correlated with how equity markets responded to the same rate move.