From a safe-haven asset to an emergency cash tool, gold quietly "transforms" amid the flames of war.

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Since the outbreak of war, gold prices have cumulatively fallen 15%, a trend that stands in stark contrast to general market expectations. This reveals a quiet transformation of gold’s role under extreme geopolitical pressure—from the traditional safe-haven asset to the emergency liquidation tool for central banks and governments.

Since the US and Israel attacked Iran on February 28th, the Turkish central bank has sold or swapped about 60 tons of gold reserves in just two weeks. Meanwhile, the Russian central bank has also been consistently reducing its gold holdings. Analysts suggest that Gulf oil-producing countries may also be selling gold due to a sharp decrease in energy export revenues.

The concentrated selling by multiple central banks is reshaping the supply-demand logic of the gold market. This trend shows that for economies deeply embroiled in the vortex of war, gold's primary function is no longer wealth preservation, but rather the means to obtain urgently needed funds, energy, and materials.

This "metamorphosis" of gold is not an isolated market event, but a microcosm of global wealth evaporating at an accelerated rate. Unlike local conflicts in limited areas over past decades, the current war is destroying productive capacity on an unprecedented scale, with its impact on the global economic system far exceeding any past crisis.

Central Bank Reductions: The Wave of Selling from Turkey to Russia

The Turkish central bank’s reduction actions are striking in both scale and speed. Selling or swapping about 60 tons of gold in just two weeks demonstrates the severe liquidity pressure it is facing.

As an energy net-importer adjacent to the war zone, Turkey is under double pressure: on one hand, energy import costs are soaring because of the heated conflict; on the other, foreign exchange income channels are narrowing due to geopolitical tensions, forcing it to use gold reserves to fill the gap.

The Russian central bank's continued reductions reflect broader fiscal pressure. Meanwhile, the situation for Gulf oil-producing countries is equally bleak—tankers are blocked in the Strait of Hormuz, petrodollar income has plummeted, forcing some nations to consider selling their accumulated gold reserves to maintain operations.

These selling behaviors have jointly suppressed gold prices, delivering a severe blow to long positions that originally expected gold to strengthen amid war.

The "Three States" of Gold: Geopolitical Temperature Determines Asset Attribute

Gold shows distinctly different forms under various geopolitical climates. When tensions escalate but remain under control, gold exists as a liquidity hedge tool—the preferred choice for institutions and governments to mitigate risk.

However, when the intensity of war exceeds a critical threshold, gold’s attributes fundamentally change in the hands of holders—it can neither satisfy hunger nor directly pay bills. Holders in difficulty are forced to liquidate it in exchange for more urgent materials and funds.

In extreme situations, when government-issued fiat currency completely loses credibility due to hyperinflation, gold returns to its oldest form—a means of storing value and serving as a medium of exchange across human history.

The current 15% decline precisely corresponds to the second stage of war: liquidity crisis has overwhelmed hedging demand, and large-scale liquidation has become the main theme.

The Scale of Wealth Destruction: Why This War Is Different

The drop in gold prices itself is a window into the scale of global wealth losses.

In past decades, the geographical scope of wars was relatively limited and the overall impact on global economic prosperity was negligible. The global economic system had enough resources to compensate for war losses through normal market mechanisms.

The nature of the current conflict is fundamentally different. Productive capacity is being destroyed on a massive scale, and at the same time, in the name of national security, countries are racing to rebuild redundant infrastructure systems. The resulting capital demand and accelerated capital depletion appear together, creating a rare and dangerous compounding effect.

Unlike any crisis in the past 50 years, back then the world had abundant idle productive capacity, and fiscal expansion or quantitative easing could effectively stimulate demand and fill gaps.

Inflation Dilemma: Fiscal Expansion Cannot Resolve Structural Contradictions

In a wartime economy with limited production capacity, commonly used policy tools by governments face severe tests.

Fiscal expansion and quantitative easing are unlikely to play their traditional roles under these conditions—when productive capacity itself is destroyed, releasing more money only further raises price levels, not output growth.

Under the current wartime supply constraints, inflation will become a primary contradiction that’s harder to resolve. For investors, this means asset allocation logic must adapt to a new environment of higher inflation, higher capital costs, and greatly reduced effectiveness of traditional policy tools.

The short-term "emergency liquidation" attribute of gold may not negate its long-term wealth preservation function, but the scale of wealth destruction revealed by the current selling wave is enough to make the market highly vigilant about global economic prospects.

Risk Warnings and DisclaimerThe market contains risks and investments require caution. This article does not constitute personal investment advice, nor does it consider the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their own particular circumstances. Investing based on this article is at your own risk. ```