Gold drops 11% as war-driven dollar shortages spur reserve sales
Updated
Updated · Forbes · May 6
Gold drops 11% as war-driven dollar shortages spur reserve sales
8 articles · Updated · Forbes · May 6
Since the Iran war began on 28 February, LPL Financial says Persian Gulf states led by the UAE face funding stress after Strait of Hormuz disruptions cut oil exports.
Turkey’s central bank sold and swapped $3bn of gold in one week in March to support the lira, illustrating how bullion can become a dollar funding source in crises.
Analysts say the decline does not necessarily undermine gold’s safe-haven role, but reflects governments prioritising fuel supplies, budgets and foreign-exchange reserves when energy shocks squeeze liquidity.
As central banks sell gold during a war, is the dollar's dominance being reinforced rather than challenged?
If gold is sold for emergency cash in a crisis, is its safe-haven promise to investors now broken?
With Gulf states liquidating assets, how will this capital shock reshape the global investment landscape?
Gold Price Plunge in Early 2026: Dollar Shortages, Central Bank Divergence, and Strategic Reserve Shifts
Overview
In early 2026, despite escalating US and Israeli military actions against Iran, gold prices unexpectedly plunged from a record high due to a severe shortage of US dollar liquidity and a strengthening dollar. This forced investors and some central banks to sell gold to meet urgent cash needs, while others increased strategic gold purchases to diversify reserves amid growing de-dollarization driven by geopolitical tensions and sanctions. Investor sentiment shifted, viewing the conflict as an inflation risk, leading the Federal Reserve to hold interest rates steady, which further pressured gold. Persistent inflation and ongoing geopolitical risks, however, support gold's role as a hedge, suggesting potential price recovery later in the year amid continued central bank demand and easing monetary policy uncertainty.