Gold prices have edged lower in recent sessions even as geopolitical tensions in West Asia intensify, a development that has puzzled investors who traditionally see the metal as a safe haven during crises. For nearly two weeks, military exchanges involving the United States, Israel, and Iran have rattled global markets. During this period, India’s benchmark stock indices Nifty 50 and BSE Sensex have each fallen by more than 5%, while crude oil prices have surged past the $100 per barrel mark.
Under normal circumstances, such geopolitical instability would push investors toward precious metals. However, that trend has not fully materialised this time. On the Multi Commodity Exchange, silver prices have dropped by more than Rs 14,000, or roughly 5%, since the conflict began, while gold has also seen a modest decline.
Why Gold Is Falling
Market experts say the drop in gold prices may appear counterintuitive, but several overlapping factors are driving the current trend.
According to Ponmudi R, the sharp jump in oil prices and escalating geopolitical tensions initially triggered a broad risk-off mood across financial markets. During such periods, investors often rush to raise cash and reduce leveraged positions.
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“In such phases, even traditional safe-haven assets like gold can face short-term selling pressure as investors liquidate holdings to meet margin calls or rebalance portfolios,” he said.
Another key factor has been the strength of the US Dollar. In times of global uncertainty, capital frequently flows into the dollar and US Treasury assets. Since gold is priced in dollars, a stronger greenback tends to make the metal more expensive for buyers using other currencies, which can dampen demand.
The Indian Rupee recently weakened beyond 92.34 per dollar, touching a fresh record low — another sign of strong demand for the US currency.
Profit-Booking After a Strong Rally
Analysts also point to profit-booking as a reason behind the recent correction. Gold prices had already rallied strongly throughout 2025 and earlier this year, prompting some investors to lock in gains amid heightened volatility.
Ponmudi said the latest decline appears to be a short-term adjustment rather than a fundamental shift in the long-term demand for precious metals.
The Oil-Inflation Link
Jigar Trivedi noted that the current market environment differs from previous crises because rising crude oil prices are closely tied to inflation expectations.
Higher oil prices can push inflation upward, potentially forcing the US Federal Reserve to reassess its interest-rate policy. Stronger interest-rate expectations typically support the US dollar, which in turn puts pressure on gold prices.
According to Trivedi, once the immediate “war premium” in markets fades, investors are likely to refocus on fundamentals such as monetary policy, currency movements and central-bank buying.
What Should Investors Do?
Despite the recent correction, analysts say the long-term outlook for precious metals remains positive.
A report from Tata Mutual Fund said that any price decline driven by a stronger dollar or easing geopolitical tensions could offer an opportunity for investors to accumulate gold. The report added that structural factors supporting gold remain intact. These include growing geopolitical fragmentation, limited supply growth and continued buying by central banks seeking to diversify reserves away from fiat currencies.
Central-bank purchases of gold have nearly doubled over the past decade.
Silver, which has fallen around 5% since the conflict began, may also benefit over the longer term. Analysts say its outlook is closely linked to industrial demand, and a staggered investment strategy could help investors gain exposure while managing volatility.
Overall, while short-term market dynamics have weighed on precious metals, many experts believe the broader backdrop still supports gold and silver over the medium to long term.
