The stock market today is characterized by high volatility and significant downward pressure. Global markets are reacting to a major escalation in geopolitical tensions and the resulting impact on energy prices and inflation. The 48-hour ultimatum issued by the U.S. regarding the Strait of Hormuz has markets on edge. Fears of a direct strike on energy infrastructure have led to panic selling in global equities. US 10Y yield is climbing, gold is selling off but this is a short term reaction to higher interest rates. Gold rallies when inflation is high.
There are two situations both bullish for gold. The war ends and the oil price collapses, inflation drops, interest rates drop, gold rallies. The war continues, inflation surges, stagflation risk grows, the US government borrows more to fund the war, bullish for gold. Gold has historically performed well during periods of sustained or accelerating inflation (e.g., the 1970s stagflation era or post-2008 QE-driven inflation fears).