Gold is facing an unusual problem.

The world is surrounded by geopolitical uncertainty, energy-market disruption and concerns about inflation — precisely the kind of environment that normally sends investors rushing toward bullion.

Instead, gold has been struggling.

The metal was trading around $4,290 an ounce on Thursday after suffering a 1.7% decline in the previous session, as stronger-than-expected U.S. economic data and renewed oil-price gains pushed investors toward expectations for additional Federal Reserve interest-rate increases. Bloomberg reported that gold has fallen roughly one-fifth from its January peak since the U.S.-Iran conflict erupted in late February.

That combination has produced an increasingly complicated backdrop for the world’s most famous safe-haven asset.

Usually, geopolitical danger is gold’s friend.

War threatens economic stability. Financial markets become nervous. Investors seek assets that are not directly tied to the performance of a company, a currency or a government bond.

But there is another side to the equation.

Gold does not pay interest.

That becomes a major disadvantage when government bond yields rise and traders begin expecting central banks to keep monetary policy restrictive.

And that is exactly what has happened.

The U.S. Treasury market has been undergoing a dramatic repricing, with yields across the curve reaching their highest levels in almost two decades. The five-year Treasury yield moved above 5% for the first time since 2007, while longer-dated yields also jumped sharply.

For investors deciding where to park capital, the opportunity cost of owning gold therefore increases.

When Treasury yields were extremely low, holding a non-yielding metal was relatively easier to justify.

But when investors can earn materially higher returns from government debt, gold must compete against that income.

That is one of the biggest forces weighing on the metal right now.

The second pressure point is the U.S. dollar.

The Bloomberg Dollar Spot Index had already risen for four consecutive sessions and was trading near a two-month high. Because gold is priced in dollars, a stronger greenback makes bullion more expensive for buyers using other currencies.

That creates a double headwind.

Higher Treasury yields increase the appeal of dollar-based assets, while a stronger currency simultaneously makes gold more expensive internationally.

For gold traders, the combination can be brutal.

Then there is oil.

Crude prices have climbed again as uncertainty surrounding Iran and the Strait of Hormuz has intensified. Iranian President Masoud Pezeshkian told the United Nations that Iran would not allow freedom of navigation through the Strait while sanctions and a U.S. blockade remained in place, although he also said Tehran was prepared to negotiate.

Oil near or above $100 a barrel creates a complicated situation for gold.

At first glance, higher oil prices should be bullish for bullion because energy shocks can generate inflation and inflation can increase demand for hard assets.

But central banks respond to inflation.

If higher energy costs keep inflation elevated, policymakers have an incentive to keep rates higher — or potentially raise them further.

That monetary-policy reaction can overwhelm gold’s traditional inflation-hedge appeal.

The latest U.S. economic data have strengthened that argument.

The S&P Global flash U.S. composite purchasing managers index rose to 58.4 in September, its highest level since July 2021. The survey showed particularly strong business activity, with robust demand supporting new orders and employment across manufacturing and services.

A stronger economy makes it more difficult for investors to assume that the Federal Reserve will quickly shift toward easier policy.

Indeed, Fed Governor Michael Barr said further interest-rate increases were likely necessary to bring inflation back toward the central bank’s 2% target. Market pricing subsequently reflected expectations for multiple additional rate increases over the following months.

The result is a market paradox.

The same Middle East conflict that creates demand for gold is also pushing oil higher.

Higher oil can increase inflation.

Higher inflation can keep interest rates elevated.

Higher rates can support the dollar.

A stronger dollar and higher bond yields can then weaken gold.

In other words, the geopolitical event that should theoretically support bullion may simultaneously create the monetary conditions that undermine it.

That helps explain why gold has been unable to sustain its previous momentum.

Reuters reported Thursday that spot gold was little changed around $4,291.48 an ounce, while U.S. gold futures for December delivery gained about 0.2% to $4,326.30. The report described gold as being caught between expectations for tighter Federal Reserve policy and a decline in oil prices that could limit some inflation pressure.

That tug-of-war could remain the defining feature of the market.

There is also a technical element.

Reuters said gold had recently been trading inside an approximately $4,300-$4,400 range, with Fed comments, Treasury yields, the dollar and oil prices providing much of the short-term direction.

That range has become psychologically important because it represents the battleground between two competing narratives.

One narrative says gold remains structurally supported by geopolitical instability, concerns about public debt and demand for safe assets.

The other says higher real yields, tighter monetary policy and a stronger dollar are forcing investors to reassess how much they are willing to pay for an asset that generates no cash flow.

Neither narrative has completely won.

The broader gold story also has to be separated from the short-term move.

Gold remains dramatically higher than it was before the current geopolitical cycle, even after its recent retreat. Its elevated price shows that investors continue to attach significant value to monetary hedges and safe-haven assets.

The question is whether those factors can outweigh the force of higher interest rates.

Central-bank policy will probably remain the most important variable.

If U.S. inflation stays elevated and the economy continues expanding strongly, markets could maintain expectations for additional tightening.

That would likely keep pressure on bullion.

But if economic activity slows or inflation begins cooling despite elevated energy prices, rate expectations could change quickly.

A decline in Treasury yields and a softer dollar would remove two major obstacles facing gold.

Geopolitics could provide the third catalyst.

Any meaningful deterioration around the Strait of Hormuz could produce another wave of safe-haven demand. A credible diplomatic breakthrough, by contrast, could reduce that demand while also taking some heat out of oil markets.

For now, gold sits directly between those forces.

It is still a hedge against uncertainty.

But investors are discovering that a safe haven is not immune to the price of money.

At around $4,290 an ounce, gold is fighting for attention against government bonds offering increasingly attractive yields, a stronger dollar and a Federal Reserve that may not be finished tightening policy.

The next major move in bullion may therefore depend less on whether the world remains nervous — and more on whether interest rates remain high enough to make holding gold increasingly expensive in opportunity-cost terms.

Gold may still be the ultimate insurance policy.

Right now, however, investors are discovering that even insurance has a price.