Despite the ongoing war in West Asia battering global markets, gold prices in domestic and global markets are down around 27% from their January peak. Even after a nearly 2% rally over the last couple of days, high crude oil prices are fueling inflation fears, curbing safe-haven demand for gold. The US dollar has emerged as the preferred safe asset.
Gold futures on the Multi-Commodity Exchange have fallen 13% to Rs 1.41 lakh per 10 grams since the West Asia war began late last month. Despite the conflict disrupting global markets, safe-haven demand for the yellow metal is absent this time due to soaring crude oil prices stoking inflation fears worldwide.
"This time, the only negative for gold, despite everything else remaining positive, is the high crude oil prices and therefore inflation, and the strength of the dollar," said Naveen Mathur, director of commodities and currencies at Anand Rathi Shares and Stock Broking. He noted that pre-war expectations of rate cuts by the Federal Reserve and other central banks to promote growth have shifted amid renewed inflation risks.
The CME Fedwatch tool shows no probability of a US Federal Reserve rate cut in April, with 6% of traders anticipating a 25 basis-point hike. In India, inflation remains within the Reserve Bank of India's 2%-6% tolerance band, but prolonged high crude prices could prompt a hawkish stance and delay rate cuts.
The US dollar index has strengthened over 2% to around 100 since the war started, up from 96 levels during peak US tariff threats. This has allowed investors to book profits in gold and pivot to the dollar as a safe haven, unlike earlier surges in 2025 and early 2026.
