Gold and silver perform poorly during a period of rapidly escalating geopolitical risks The current background includes the Iran conflict, the Strait of Hormuz blockade, and rising market volatility According to traditional logic, this should have been the ideal environment for gold But if we look at the factors that are truly driving gold at present, this trend actually makes sense The real turning point occurred after the US and Europe froze Russia's foreign exchange reserves in 2022 In the past few decades, surplus countries have typically allocated their excess savings to US dollar assets, mainly US Treasury bonds The freezing event, combined with a clear signal from the US government that it will no longer encourage foreign countries to continuously allocate their surplus to US financial assets, has forced these countries to rethink the way they store their reserves At the same time, these countries have not changed their economic structure that generates excess savings, and these funds still need to find exports So, gold and silver gradually became the most natural neutral reserve assets This also explains why gold is starting to break away from its previous three driving factors, namely real interest rates, volatility, and liquidity. Nowadays, the true dominant factor in gold prices is the capital flow formed by the allocation of reserves in various countries This change has brought about a result that has been overlooked by most investors If gold is mainly driven by reserve flows from surplus countries, then its attributes have shifted from a safe haven asset to a pro cyclical asset The growth of reserves depends on export revenue, trade surplus, and the growth of related economies When the global economy is prosperous and surplus countries have strong exports, excess savings increase, reserve expansion accelerates, and gold naturally benefits Conversely, when the surplus is under pressure, this support will weaken or even reverse The blockade of the Strait of Hormuz is a typical case Gulf countries are important reserve holders and buyers of gold, but now their export revenues are severely impacted In order to maintain fiscal spending, they may need to use some of their reserves, and gold is precisely one of the most liquid assets Even though the actual scale of selling is not yet clear, the market already expects its reserve accumulation to slow down or even turn into net outflows The funding flow that originally constituted an important source of demand has been interrupted at least in the short term Meanwhile, this shock is also transmitted to other surplus economies through energy prices As the world's largest oil importer, China will face a slowdown in growth and a contraction in its trade surplus, which will weaken its reserve accumulation capacity This pressure will also spread to Asian economies such as South Korea and Japan In other words, the core chain that supported the rise of gold in the past, namely surplus countries generating excess savings and seeking allocation directions outside the US dollar system, is being disrupted And this event should have been clearly bullish for gold under the old framework This does not mean that the long-term logic of gold has been disrupted The dominant system of the US dollar is still loosening, surplus countries still need to replace reserve assets of US bonds, and gold is still the most direct choice But it can be foreseen that within this structural trend, the volatility of gold prices will significantly increase, and its volatility pace will depend more on global growth and surplus changes, rather than traditional interest rates or hedging logic When the surplus expands, gold rises When the surplus shrinks, gold rebounds Even if the reason for the contraction is the increase in geopolitical risks, under the old logic, it should have driven up the gold price