Remember too, once upon a time, Iron(or more properly Steel, iron itself made rather shoddy gear) was not so common as you think. Steel weapons were significantly superior to the bronze or stone equipment, and its superiority as a weapon gave it a mystical significance.
Cold iron, in poetic parlance, was originally iron used as weapons, but the meaning evolved to iron in general later on.
Its relation with the sidhe was the origin of some of the myths with the sidhe being the natives with bronze and stone weapons, who couldn't stand up for long to better equipped invaders. As time went on the stories were distorted and inflated, going from people to Little Folk and adding a dash of magic to it.