There seems to be widespread disbelief among gold investors, as gold prices have fallen by over 10% since the US and Israel started bombing Iran on February 28th. Many investors think that gold is a safe haven that should do its best during crisis periods, as we are in. This assumption fails to consider the biggest driver of all asset prices, liquidity.Today, as is typical in crises, liquidity tightens, and many foreign countries and companies demand dollars. As such, the dollar appreciates versus other currencies. With the depreciation of foreign currencies, gold becomes more expensive.For instance, the euro is down about 7% versus the dollar since the conflict started. Thus, the price of gold is 7% higher for Europeans than it otherwise would have been. This causes demand for gold to decline, while the need to sell gold for liquidity purposes rises.Alongside the dollar appreciation, Treasury yields have been rising. With long-term bond yields now approaching 5%, the opportunity cost of holding gold, which earns 0%, becomes higher. While we wait on official data, we suspect that foreign buying of UST bonds has been brisk.Higher yields and a stronger dollar create a feedback loop that results in further dollar appreciation and lower gold prices. As a result, gold is trading like stocks and not the safe haven many expect it to be.Value Over Growth Is Back In VogueAs was the trend prior to the Iranian conflict, value has reasserted itself as the preferred sectors and factors for investors. Growth stocks, especially mega-cap growth and the Magnificent Seven, were among the worst performers last week. The graphic below shows that high-dividend-yield and large-cap value stocks are the most overbought relative to other sectors. However, they are decently oversold on an absolute basis. Mega Cap Growth and Disruptive Tech (ARKK) are very oversold on a relative and absolute basis. Note that a large majority of the factors are overbought relative to the market, meaning many stocks are outperforming the S&P 500 during this downturn.The second graphic shows that almost all sectors, except energy stocks, are oversold on an absolute basis. Energy, not surprisingly, is grossly overbought. It may remain so until oil prices normalize. We advise taking profits in the sector and being ready to rotate out of energy if the conflict shows signs or the flow of oil resumes toward more normal levels.Tweet of the DayOriginal Post