Gold prices fell in recent sessions even as geopolitical tensions escalated in West Asia, surprising investors who typically view the precious metal as a safe haven during periods of uncertainty.It has been 14 days of intense military exchanges between the United States, Israel, and Iran. During this period, the benchmark indices Nifty and Sensex fell by more than 5% each, while crude oil crossed the $100 mark, destabilizing global markets. Traditionally, such conditions tend to support precious metals. However, this pattern did not appear this time. Silver prices on the Multi Commodity Exchange fell by over Rs 14,000, or about 5%, while gold prices also fell, according to an ET report.
Market participants say the recent decline, despite the start of the war, may seem counterintuitive because gold is typically seen as a refuge during geopolitical turmoil. But there are many overlapping factors shaping the current trend.The sharp rise in crude oil prices and rising geopolitical tensions initially sparked widespread risk-off sentiment, prompting investors to raise funds and reduce leveraged positions across asset classes, said Ponmudi R, CEO, Enrich Money.
“At such stages, even traditional safe-haven assets like gold can face short-term selling pressure as investors liquidate their holdings to meet margin calls or rebalance portfolios,” he said.He added that the strength of the US dollar also played a major role. In times of global uncertainty, capital often flows into the dollar and US Treasuries, which typically affects precious metals because they are priced in dollars.
The Indian rupee fell past the 92.3475 mark against the US dollar, hitting a new all-time low on Thursday.Another factor is profit-taking after gold’s strong rally earlier this year and in 2025. With prices already at elevated levels, some investors have opted to take gains as volatility increases. Ponmudi said the recent weakness appears to be just a short-term adjustment and not a structural shift in long-term demand for precious metals as safe haven assets.Jigar Trivedi of IndusInd Securities also noted that the current scenario is different because crude oil has a direct correlation with inflation. High oil prices tend to push inflation higher, which can negatively impact the economy and force the US Federal Reserve to reevaluate its policy stance. The Fed is currently monitoring employment and inflation trends closely, with a medium-term goal of keeping inflation near 2%.A stronger dollar usually puts pressure on gold prices because it makes the metal more expensive for buyers using other currencies, weakening demand. Trivedi added that once the war premium fades, investors will likely refocus on underlying fundamentals such as monetary policy, the dollar index and central bank purchases.
What should investors do now?
“We are reinvesting in gold due to supportive fundamentals and uncertainty in the market. Any decline in prices due to dollar appreciation or easing of tensions provides an opportunity to accumulate/invest in gold,” ET quoted the Tata Mutual Fund in a report as saying.The report added that corrections following strong rises are normal and do not undermine the long-term bullish outlook for precious metals. Structural factors supporting gold remain intact, including geopolitical fragmentation, supply constraints, and continued purchases from central banks, as countries diversify reserves away from fiat currencies. Purchases of gold by global central banks have nearly doubled over the past decade.For silver, which has fallen by around Rs 14,000 or 5% since the conflict erupted, the report said geo-economic conditions coupled with structural and cyclical fundamentals could continue to support prices. Investors may consider accumulating declines, especially against the broader supportive backdrop for precious metals. The outlook for silver, in particular, remains tied to a recovery in industrial demand, and a staggered investment approach may be appropriate for medium to long-term exposure.(Disclaimer: Recommendations, opinions regarding stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times Of India)