Why gold, silver are falling despite worsening US-Iran war

Gold and silver had rallied significantly over the past few months, so when prices jumped after the news, some investors booked profits, which led to a correction rather than a sustained sharp rise

• Gold and silver prices fell despite ongoing US-Iran conflict
• Strong US dollar, Treasury yields lower gold's safe-haven appeal
• Investors' profit-taking curbed further price spikes.

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Almost 10 days after the United States and Israel launched military strikes against Iran, gold and silver have moved sharply in the opposite direction of what is typically expected during a major geopolitical crisis.

On February 28, when the conflict began, gold was trading near $5,416 an ounce. Since then, even as the conflict has widened to other Gulf countries, gold has slipped about 5.7 percent. At 1.30 pm on March 9, the precious metal was trading near $5,103.

At home, the trend is similar. On the Multi Commodity Exchange (MCX), gold was trading at around Rs 1.67 lakh on February 28. It now hovers around Rs 1.60 lakh, a decline of roughly 4.2 percent.

Silver has seen a sharper correction. On the same date, silver was trading at around Rs 2.89 lakh a kilo on the MCX. on March 9, the metal was trading close to Rs 2.63 lakh, down nearly 9 percent in just over a week.

Gold and silver are traditionally seen as haven assets that rise sharply during wars and geopolitical tensions. Despite the US-Iran conflict, which has left all of West Asia instable, and the Russia-Ukraine war, prices have dropped.

Reasons why gold and silver are not acting as safe havens

Gold and silver prices have not gained sharply because the US dollar has strengthened and the shifting expectations around the Federal Reserve’s rate-cut trajectory have weighed on investor sentiment.

During conflicts in oil-rich West Asia, oil prices usually move higher and since crude is largely traded in dollars, global demand for the greenback goes up.

Secondly, market players may be gauging whether this conflict will be geographically isolated or short-lived, which could trigger periodic profit-taking following an extreme move rather than an outright rally. Satish Dondapati, Fund Manager at Kotak Mutual Fund, said, "Gold and silver had rallied significantly over the past few months, so when prices jumped after the news, some investors booked profits, which led to a correction rather than a sustained sharp rise."

Third, investors are also moving funds to US treasuries and dollar-denominated assets, which are considered safe during periods of uncertainty. As investors have multiple safe-haven options beyond gold, the demand is spread across different assets, keeping the metal price rise moderate.

The fourth reason is the fall in equity markets. The Sensex and the Nifty ended over 1.7 percent lower, trimming some of the intraday losses which saw the market tank to its lowest in 11 months over crude surge.

"When equities decline sharply, investors sometimes sell gold to raise liquidity. Since gold has given strong returns over the last year, some investors are booking profits or selling holdings to cover losses in other assets, which is also putting short-term pressure on prices," said Dondapati.

The fifth reason could be high global interest rates, which make bonds and other interest-bearing assets more attractive than gold. "The appreciation in the US dollar and the increase in US bond yields due to inflation and delayed cuts in interest rates are limiting the upside in gold prices," said Aksha Kamboj, Vice President, India Bullion & Jewellers Association (IBJA) and Executive Chairperson, Aspect Global Ventures.

Another reason could be that "all investor money is going towards crude oil due to war escalation in anticipation of oil shortage and hence gold prices have temporarily taken a pause," said Kamboj.

How is the US-Iran war different from the Russia-Ukraine conflict?

In earlier geopolitical crises, including the Russia-Ukraine war in 2022, gold typically emerged as the primary haven asset, as investors rushed to save their portfolios from uncertainty. The US-Iran conflict is unfolding in a different market environment.

"The key difference from the Russia–Ukraine crisis is that the US dollar and treasury yields are currently very strong, which reduces the safe-haven appeal of gold," said Renisha Chainani, Head of Research, Augmont. "When yields rise, the opportunity cost of holding non-yielding assets like gold increases. Additionally, financial markets today are more liquid and diversified, with investors also moving into the dollar, energy assets, and defense stocks as alternative hedges. As a result, the geopolitical premium in gold has remained limited despite the intensity of the conflict," said Chainani.

Another factor is investor positioning. Gold had already witnessed a strong rally in 2025, which meant many investors had accumulated positions earlier, leaving limited room for fresh buying when the conflict escalated.

Analysts also believe markets currently expect the conflict to remain relatively contained rather than evolve into a prolonged global war.

The market believes the conflict may remain limited rather than turn into a long global war, so panic buying in gold is not very strong, said Dondapati.