Why Gold and Silver Fall When War Begins

The piece argues that gold/silver often *sell off when war actually begins* because the market typically prices the uncertainty premium *before* hostilities start, and because the initial outbreak can trigger a liquidity scramble (margin calls/risk-off deleveraging) that forces sales of highly liquid assets like bullion. In practice, metals may rally during the build-up (rising tension/unknown outcomes) and then retrace once the event becomes defined and positioning is unwound. It cites historical analogs: gold rallied ahead of the first Gulf War (1990) but declined once Operation Desert Storm began (Jan 1991); a similar “buy the rumour, sell the news” pattern appeared in the 2003 Iraq War. In early 2022, gold briefly pushed above ~$2,000 during escalating Russia–Ukraine tensions, then corrected after the invasion began rather than immediately extending higher. Mechanistically, the article highlights (1) liquidity demand at shock onset—forced selling to raise cash can hit gold/silver because they’re among the easiest assets to monetize; and (2) USD/Treasury bid—safe-haven flows into USD and Treasuries can pressure USD-denominated metals in the near term. It contrasts this with energy, which may spike on physical supply-risk, while gold is framed as more sensitive to monetary/financial conditions. Near-term takeaway for positioning: headline escalation risk may be most supportive *during the run-up*; the outbreak itself can be a catalyst for a tactical pullback if the USD rips higher or deleveraging intensifies. Medium-term, the piece leans constructive on metals via war-related deficit expansion, higher debt issuance and potentially easier policy/greater inflation risk—though timing is uncertain and path-dependent on real rates and USD direction.