Gold is down -14% and silver -28% over the last 3 weeks, despite the Iran War, Strait of Hormuz blockade, and surging market volatility, conditions that would traditionally send precious metals higher.

Silver is falling harder because ~50% of its demand comes from industrial use, making it far more sensitive to a global economic slowdown triggered by the oil shock.

The reason is that gold is not driven by fear FOR NOW, it is driven by reserve flows from surplus countries.

After the US and Europe froze Russian reserves in 2022, countries with large trade surpluses began shifting excess savings into gold instead of US Treasuries, making reserve accumulation the primary driver of gold prices.

The problem is that the Strait of Hormuz blockade is crushing export revenues for Gulf states like Saudi Arabia, the UAE, and Kuwait.

With revenues collapsing, fears are rising that these countries may need to sell reserves, including gold, to cover government spending rather than accumulating more.

The shock is also rippling through Asia, as China, the world's largest oil importer, faces slowing growth that compresses its surpluses and reserve accumulation.

Put simply, the countries that were buying gold or own it in reserves would have to stop buying for some time or even be forced to sell at some point.

Meanwhile, silver is falling even harder because ~50% of its demand comes from industrial use, making it far more sensitive to a global economic slowdown triggered by the oil shock.

The structural case for gold is not broken, but gold for now moves with global trade, not global market fears.