Gold and silver prices saw a sharp fall on Monday morning, even as global tensions remain high due to the ongoing conflict in West Asia. The drop has surprised many investors, as precious metals are usually seen as safe assets during such uncertain times.
As of 10:26 am on MCX, gold futures were trading at Rs 1,37,307, down Rs 7,185 or 4.97%. Silver futures were at Rs 2,13,600, down Rs 13,172 or 5.81%.
The fall comes after a strong rally in recent months, when both gold and silver had surged as investors rushed to safe-haven assets amid rising geopolitical risks and higher crude oil prices.
The is that prices had already risen sharply before this correction. Investors had bought heavily during the early phase of the conflict, pushing gold and silver to very high levels. This led to a situation where there was strong demand for physical gold and silver, and in some cases, even shortage in supply.
Now, with prices at elevated levels, many investors are booking profits. This has led to a sharp pullback.
Another major reason is the shift in interest rate expectations globally. With crude oil prices staying above $110 per barrel, inflation concerns have increased. This has reduced the chances of interest rate cuts and instead raised the possibility of rate hikes.
Higher interest rates reduce the appeal of gold because it does not offer fixed returns like bonds or deposits.
Global cues also support this trend. Spot gold has fallen to around $4,372 per ounce, down about 2.5%, while US gold futures have declined 4.4%. Gold has now fallen for nine straight sessions and is at its lowest level since early January. It has lost more than 10% in the past week.
Market experts say that liquidity is also playing a role.
“With the Iranian conflict into its fourth week, and oil prices hanging around the $100 level, expectations have shifted from rate cuts to potential rate hikes which has hurt gold’s appeal,” Tim Waterer, Chief Market Analyst at KCM Trade, told Reuters.
He added that gold’s liquidity is now working against it. “Steep selloffs in Asian stock markets are leading to unwinding of long positions in gold,” he said.
In simple terms, investors are selling gold to cover losses in other markets, especially equities.
Silver, which is more volatile than gold, has fallen even more sharply. Globally, spot silver is down around 3.2%, reflecting the same trend.
The current market situation is seeing selling across asset classes.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said, “It is important to understand that the huge risk-off globally has impacted all assets including stocks, bonds and precious metals like gold and silver. In fact, the crash in the safe haven gold is worse than in equities. There is nothing that investors can do during this crisis characterised by huge uncertainty. If history is any guide investors should not panic, but keep cool.”
This shows that even safe-haven assets are not immune when markets face extreme uncertainty.
At the same time, the conflict has kept crude oil prices high, which is adding to inflation fears. While inflation usually supports gold, the expectation of higher interest rates is currently having a stronger impact.
The current fall does not necessarily mean that the long-term trend for gold and silver has changed.
This appears to be a correction after a sharp rise.
Gold and silver usually gain during wars and crises because investors look for safer options. However, in this case, a large part of that buying had already happened earlier. That is why prices are now adjusting.
For investors, the key is to stay calm and not react to short-term movements. Markets are likely to remain volatile as long as global tensions and interest rate concerns continue.
In simple terms, gold and silver are falling not because they have lost their safe-haven status, but because prices had already risen too much, and global financial conditions are now changing.