Why Gold Didn't Spike: A Fekete Diagnosis of the Iran War

On March 17, 2026, Al Jazeera ran the following headline: "Why aren't gold prices rising, despite Iran war uncertainty?" ¹ Gold futures for April delivery had risen 0.1% that day. The Strait of Hormuz was closed. The United States and Israel had been at war with Iran for two and a half weeks. Supreme Leader Ali Khamenei had been dead since the opening strike of February 28. And gold — the asset that is supposed to rise in exactly these conditions — sat at $5,005 per ounce, below where it had been on the morning of the first missile: 3.5% under the $5,183.80 close of February 27.

This confused nearly everyone. It should not have confused anyone who has read Antal Fekete.

The shape of the anomaly

Gold did make its expected initial move. It rose from $5,183.80 at the February 27 close to $5,384.30 on March 2, touching $5,400 intraday — a 3.9% jump on the first trading session after the strikes. Then, over the next four trading days, it sold off to $5,085.76 on March 6 — a drop of 5.5% in the middle of an active shooting war involving the world's most important oil chokepoint. ² It traded in a narrow range around $5,000 to $5,200 for the following two weeks, even as Iran fully closed Hormuz, the United States maintained a naval blockade, and oil prices gyrated by double digits on every new headline. ²

More telling: central banks, which had been accumulating gold above 1,000 tonnes a year for three consecutive years and well above the long-run average in a fourth, became net sellers in March — 30 tonnes out, the first monthly outflow after ten straight months of buying. ³ By mid-April, spot gold had fallen 14% from its January 28 peak of $5,602. ² The Turkish lira ground to successive record lows, and Turkey led the selling by a wide margin — the World Gold Council's stated reason for it is the whole argument of this essay: the reserves were tapped for foreign exchange and liquidity management. ETF redemptions accelerated. March produced the largest monthly outflow in the history of gold ETFs — $12 billion globally, $13 billion out of North America alone, of which roughly $8.5 billion came out of SPDR Gold Shares. ⁴

The financial press asked the wrong question. The real question is not "why didn't gold rise?" The question is: what kind of crisis makes risk-averse institutions sell the asset they had been hoarding specifically as a hedge against exactly the kind of crisis they are now facing?

Fekete's answer, written in 2008

Buried in Fekete's essay "Red Alert: Gold Backwardation!!!" — published December 5, 2008 — is the analytical key. ⁵ Fekete argued that gold is not merely a safe-haven commodity. It is the only commodity whose paper substitute can approach cash status under normal market conditions. This is Menger's marketability doctrine sharpened to its finest point: the most marketable good is one whose promise to deliver is, under ordinary circumstances, functionally equivalent to the good itself.

When that equivalence begins to fail — when the promise-market and the physical-market begin to diverge — gold enters backwardation. In backwardation, the nearby futures price trades above the deferred contracts. Translated into plain English: the paper claim is worth less than the metal. The market is saying it does not trust the promise.

Fekete identified backwardation as the terminal signal of fiat monetary systems. His December 2008 dispatch was urgent because gold had briefly entered backwardation on December 2 — December futures at a 1.98% discount to spot — which Fekete described as the first occurrence in history. ⁶ It was in fact the second of the modern era: gold had backwardated once before, over September 29 and 30, 1999, in the scramble that followed the Washington Agreement. ⁶ Both episodes lasted days. He warned that the next occurrence — sustained rather than transient — would be the point from which there is no return.

What is actually happening in 2026

The spot market has not yet entered sustained backwardation. But the behavior of central banks during the Iran war is the functional equivalent of backwardation at the reserves level. Consider the mechanics.

The Iranian rial collapsed in December 2025 under the "maximum pressure" strategy, breaching 1.2 million and then 1.3 million to the dollar inside a fortnight and ending the month near 1,420,000. ⁷ The Turkish lira continued its managed slide to successive record lows through the war, down roughly 7% on the year. ⁸ The banks that sold were not emerging markets as a class — Poland, Uzbekistan, Kazakhstan and China were all buying through the same quarter — but the specific banks that suddenly needed dollar liquidity more urgently than they needed additional gold. They sold gold, into what had been a strong bid, to raise dollars. Against their own long-term strategic interest. Because the short-term liquidity requirement was existential. Turkey's own central bank governor characterized the swap component of its sales as tactical rather than strategic, gold-currency swaps expected to return on maturity. The framework's reading is that a tactical explanation and a liquidity explanation are the same explanation seen from opposite sides of the desk.

This is the 1980 COMEX silver scene replayed at the official sector. Fekete told the story of standing in a Geneva banker's office in January 1980, watching armored trucks cross the Rhone in both directions at once. The anecdote is his, and what it illustrates is not in doubt. The breakdown of paper-promise equivalence for silver had paralyzed normal bank clearing. Banks stopped accepting one another's promises. They had to physically move metal. Ordinarily invisible counterparty stress became literally visible on the street.

In 2026, the stress is digital and diffused rather than mechanical, but the underlying phenomenon is identical. Central banks of countries under acute currency and liquidity stress are being forced to monetize their gold reserves to obtain the one asset that still clears without question at scale: the U.S. dollar. They do this not because they have lost faith in gold. They do this because, in an acute liquidity crisis, the dollar is still more immediately marketable than gold, even as it loses long-term monetary credibility.

This is the heart of Fekete's insight that conventional gold bugs miss. Gold is senior money. The dollar is junior money. But the dollar has been engineered into a position where, in extremis, it is more immediately clearable than anything else — including gold — because it sits at the apex of every payment rail, every derivative contract, and every repo agreement on earth. Fiat's dominance in the crisis window is not a refutation of gold's monetary primacy. It is a symptom of the fact that the dollar has devoured the infrastructure through which marketability gets expressed.

The tell the headlines missed

The most revealing detail in the 2026 central-bank gold data is not the selling itself. It is who is selling. The sellers are the banks reaching for dollars: Turkey, which shed roughly 70 tonnes outright and swapped a further 80; Russia, 22 tonnes; Azerbaijan's sovereign fund, another 22. The banks that kept buying through the same quarter — Poland at 31 tonnes, Uzbekistan at 25, Kazakhstan at 12, China at 7 ⁹ — are the ones that do not need dollar liquidity, because they have either cultivated alternatives or sit outside the sanctions perimeter. Russia is the awkward case for this reading and the framework should say so: a sanctioned state with cultivated alternatives sold anyway, which suggests the pull of dollar liquidity reaches further than the sanctions map predicts.

The ETF flows drew the same line. North America pulled $13 billion out in March; Asia recorded its strongest quarterly inflow on record over the same window, $14 billion, led by Chinese buying, and global gold ETFs still closed the first quarter with a seventh consecutive quarter of net inflows. ⁴ The metal did not leave the market. It changed hands.

This is Menger's marketability spectrum in real-time. Banks whose local currency is collapsing must reach up the marketability ladder to grab the asset most immediately accepted by the parties they owe. Banks whose local position is stable can afford to hold the asset they consider senior money. The divergence in behavior tells you which banks are acting under duress and which are acting on long-term strategy. It is the same signal as backwardation, delivered through a different instrument.

What happens next

The forced gold selling by emerging-market central banks cannot continue indefinitely, for a simple reason: it exhausts the reserves those banks built specifically to defend against this scenario. Each ton sold reduces the buffer against the next crisis. At some point — and the point is nearer than the current price action suggests — the selling stops. Not because of a change in strategy, but because there is nothing left to sell.

When the forced selling stops, the price reversal will be violent. Central banks that were pushed out of their positions at depressed prices will need to rebuild those positions at whatever the market price is. They will face competition from central banks that never sold. The ETF flows that amplified the downside will reverse and amplify the upside. Fekete titled two essays of 2009 around the phrase — Dress Rehearsal for the Last Contango in July, More Dress Rehearsal for the Last Contango in August ¹⁰ — arguing that the paper gold trade of the period was a rehearsal for a Last Contango that would be followed by permanent backwardation. The reading this essay adds to his is that the rehearsal takes the shape of oscillation: the paper-metal spread compressing, widening, compressing again, each swing more violent than the last. That is what we are now in.

The practical implication is not a specific price target. It is a regime shift. The correlation of gold to geopolitical crisis, which was reliable for four decades, has decoupled. Gold in 2026 correlates to dollar liquidity, not to geopolitical stress. Dollar liquidity is determined by the Federal Reserve, the Treasury, and — as has become uncomfortably obvious — by the logistics of global energy flow through the Strait of Hormuz. Investors who continue to frame gold through the old safe-haven lens will continue to be surprised. Investors who have read Fekete are watching something very specific: the moment at which the EM central-bank sell flow exhausts itself, at which point the metal will enter a new phase.

The deeper signal

The broader message of the 2026 gold action is the one Fekete built his career around: a monetary system's crisis cannot be resolved by its own tools. Standard Austrian gold advocates predicted hyperinflation from quantitative easing and were wrong. Standard gold bugs predict rallies on wars and are wrong in 2026. What both groups have in common is a failure to distinguish — as Fekete insisted was essential — between monetary and non-monetary commodities, and a failure to understand that the relationships governing monetary commodities run through the gold basis and paper-substitution mechanics rather than through the headline risk factors that animate equity markets.

The Iran war is not the crisis. It is the accelerant of a crisis that was already in motion. The crisis is in the architecture of paper money itself, and in the infrastructure through which marketability is now expressed. The flatness of gold during a shooting war is the architecture's way of telling us something that the headlines do not: we are closer to the end than to the beginning.

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This is the first essay in the New Austrian Economics series. The series extends the framework of Carl Menger (1840–1921) and Antal E. Fekete (1932–2020) into the conditions of 2026 — an era of petrodollar decay, algorithmic finance, cryptographic fragility, and the emergence of frontier AI labs as de facto issuers of the digital trust layer. Subsequent essays will develop each of these threads in turn.

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Sources

Footnotes

1. Al Jazeera. "Why aren't gold prices rising, despite Iran war uncertainty?" 17 March 2026. https://aljazeera.com/economy/2026/3/17/why-arent-gold-prices-rising-despite-iran-war-uncertainty — Quoted verbatim; records the war in its eighteenth day, spot at $5,001.36 and April futures at $5,005.20 at 11:00 GMT. ↩

2. LBMA gold price and COMEX front-month settlements, February-April 2026. https://www.lbma.org.uk/prices-and-data/precious-metal-prices — For the spot levels, the January peak and the subsequent drawdown. ↩ ↩² ↩³

3. World Gold Council central bank research. https://www.gold.org/goldhub/research/central-banks — 1,082t in 2022 (most since 1950), 1,037t in 2023, ~1,045t in 2024, 863t in 2025, against a 2010–2021 average near 473t. ↩

4. World Gold Council, Gold ETF Flows, March and Q1 2026. https://www.gold.org/goldhub/data/gold-etfs-holdings-and-flows — For the monthly and regional flow figures and the SPDR Gold Shares share of the North American outflow. ↩ ↩²

5. Fekete, Antal E. "Red Alert: Gold Backwardation!!!" 5 December 2008. https://www.gold-eagle.com/article/red-alert-gold-backwardation ↩

6. Fekete, Antal E. Backwardation That Shook the World, 2008. https://professorfekete.com/articles/AEFBackwardation.pdf — Gold entered backwardation 2 December 2008, December futures at a 1.98% discount to spot. The modern precedent is 29–30 September 1999, after the Washington Agreement. ↩ ↩²

7. Iran International. "Iran rial hits new record low of 1.31 million to the dollar." 15 December 2025. https://www.iranintl.com/en/202512153499 — Breached 1.2m then 1.3m within a fortnight; near 1,420,000 by late December, with point-to-point inflation above 50%. ↩

8. Central Bank of the Republic of Türkiye exchange-rate statistics. https://www.tcmb.gov.tr/ — For the lira's managed depreciation across the period. ↩

9. World Gold Council. Gold Demand Trends Q1 2026, "Central Banks." https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q1-2026/central-banks — Turkey ~70t sold plus 80t swapped, Russia 22t, Azerbaijan 22t; Poland +31t, Uzbekistan +25t, Kazakhstan +12t, China +7t. Turkish sales attributed to foreign exchange and liquidity management. ↩

10. Fekete, Antal E. "Dress Rehearsal for the Last Contango," 19 July 2009. http://www.gata.org/node/7716 ↩