Gold prices have slipped 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 involving the United States, Israel and Iran. Over this period, benchmark indices Nifty and Sensex have declined more than 5% each, while crude oil has crossed the $100 mark, unsettling global markets. Traditionally, such conditions tend to support precious metals. However, that pattern has not played out this time. Silver prices on the Multi Commodity Exchange have fallen by more than Rs 14,000, or about 5%, while gold prices have also edged lower, according to an ET report.Market participants say the recent decline, despite the onset of war, may appear counterintuitive because gold is typically viewed as a refuge during geopolitical turmoil. But several overlapping factors are shaping the current trend.Ponmudi R, CEO of Enrich Money, said the sharp spike in crude oil prices and rising geopolitical tensions initially triggered a broad risk-off sentiment, prompting investors to raise cash and trim leveraged positions across asset classes. “In such phases, even traditional safe-haven asset like gold can face short-term selling pressure as investors liquidate holdings to meet margin calls or rebalance portfolios,” he said.He added that the strength of the US dollar has also played a key role. In times of global uncertainty, capital often flows into the dollar and US Treasuries, which typically weighs on precious metals because they are priced in dollars. The Indian rupee weakened past the 92.3475 mark against the US dollar, hitting a fresh all-time low on Thursday.Another factor has been profit-booking after the strong rally in gold earlier this year and in 2025. With prices already at elevated levels, some investors chose to lock in gains as volatility increased. Ponmudi said the recent weakness appears to be more of a short-term adjustment rather than 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 differs because crude oil has a direct relationship with inflation. Higher oil prices tend to push inflation higher, which can negatively affect the economy and force the US Federal Reserve to reassess its policy stance. The Fed is currently monitoring employment and inflation trends closely, with a medium-term target of keeping inflation near 2%.A stronger dollar typically puts pressure on gold prices as it makes the metal more expensive for buyers using other currencies, dampening demand. Trivedi added that once the war premium fades, investors are likely to refocus on underlying fundamentals such as monetary policy, the dollar index and central bank purchases.
What should investors do now?
“We reiterate investing in gold over supportive fundamentals and market uncertainties. Any decline in prices over dollar rally or ease in tensions provides opportunity to accumulate/invest in gold,” Tata Mutual Fund said in a report, ET quoted.The report added that corrections following strong rallies are natural and do not undermine the long-term bullish outlook for precious metals. Structural factors supporting gold remain intact, including geopolitical fragmentation, supply constraints and sustained central bank purchases as countries diversify reserves away from fiat currencies. Global central bank buying of gold has nearly doubled over the past decade.For silver, which has declined about Rs 14,000 or 5% since the conflict erupted, the report said geo-economic conditions along with structural and cyclical fundamentals could continue to support prices. Investors may consider accumulating on declines, especially given the broader supportive backdrop for precious metals. Silver’s outlook, in particular, remains tied to a recovery in industrial demand, and a staggered investment approach may be suitable for medium- to long-term exposure.(Disclaimer: Recommendations and views on the 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)