What the US 'ashvamedha' run and AI could mean for the dollar

Investors must track scenarios of how the Iran war and AI use might impact gold and this currency

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A subtle twist in the tale: The strength of the US dollar as measured by the Dollar Index (DXY) peaked at 114 in September 2022, a 20-year high. It has been falling since then, hitting 97 on 28 February 2026, the start of the Iran war. DXY measures the dollar's strength against a basket of currencies. Gold, which was at $1,700 per ounce in September 2022, has more than tripled to $5,274 per ounce on 28 February. Over this period, the global de-dollarization narrative of a gradual erosion in the dollar's use as a reserve currency gained momentum. Globally, central banks have ramped up their gold holdings in preference over dollar assets, strengthening that story.

At the start of the Iran war, many expected gold prices to spike and DXY to barely keep up or even fall. The expectation was driven by DXY-gold dynamics during recent geopolitical stresses. The Ukraine-Russia conflict in February 2022 saw gold rise by 6%, while the dollar rose by a modest 3%. The Israel-Hamas flareup in October 2023 saw gold rising by 9%, with the dollar remaining flat. The 2024 Israel-Iran conflict saw gold go up by 8% while the dollar fell marginally.