Gold Not Glittering In Crisis: What's Killing Its Safe-Haven Appeal

Long seen as the ultimate shelter in times of crisis, gold is behaving in a way that has left investors puzzled. Even as tensions in Middle East intensify amid the ongoing Iran conflict, the yellow metal has sharply corrected. Instead of rising on fear, gold has fallen nearly 18 per cent, wiping out roughly Rs 29,000 per 10 grams from recent highs.

On Monday, the sell-off deepened across precious metals:

Globally, the trend is similar:

Gold has now fallen for nine straight sessions and is at its lowest level in months, marking one of its worst weekly performances in over a decade.

What's Driving The Fall?

The answer lies less in geopolitics and more in how markets have already priced it in-and what comes next.

1) The rally came early, the correction is catching up: Gold had already surged sharply when the conflict began, as investors rushed into safe assets. That initial "fear trade" pushed prices to record highs. Now, with valuations stretched, investors are booking profits. The result: a sharp pullback.

2) Interest rates are back in focus: Crude oil staying above $100-$110 per barrel has reignited inflation concerns. That has shifted expectations from rate cuts to possible rate hikes. This matters because gold does not generate income. When interest rates rise, assets like bonds and deposits become more attractive.

3) Liquidity pressures are forcing selling: The broader market sell-off is also dragging gold down. When equities fall sharply, investors often sell liquid assets like gold to cover losses elsewhere. This "forced selling" has amplified the decline.

4) The narrative has shifted from war to inflation: Markets are no longer treating the conflict purely as a geopolitical shock. Instead, it is increasingly seen as an energy-driven inflation event. That shift is critical: inflation may support gold in theory, but rising rates-used to fight inflation-are weighing on it more heavily right now.

Risk-Off, But Nothing Is Spared

The current phase is unusual because almost every asset class is under pressure. However, despite the sharp correction, experts say gold hasn't lost its role-it's just behaving differently.

Siddharth Maurya, Founder and Managing Director, Vibhavangal Anukulkara Pvt Ltd., explains: "Recent corrections in the price of gold should not be interpreted as the 'safe haven' status of gold disappearing. Instead, the recent changes should be interpreted as adjustments in the way investors are behaving in what is a very challenging and complicated macroeconomic milieu. In current times of uncertainty, investors are moving in multiple directions at once. They are searching for safety, liquidity, and returns. Gold, as a non-yielding asset, experiences headwinds in times of high, and even rising, interest rates because gold competes with other yielding assets."

He added, "Markets often see volatility-driven profit taking who have a 'safe haven' view of gold. The important point here is that gold no longer acts exclusively in response to geopolitical events. Instead, gold is highly responsive to the global state of monetary policy, liquidity, and currency movements. The narrative is changing, not disappearing. Gold still provides a hedge to systemic risk, and in the short run, is acting more like an asset in a diversified portfolio."

What Should Investors Read Into This

• This is largely a correction after a steep rally
• Short-term movements are being driven by rates, liquidity, and positioning
• Gold is reacting to a broader financial reset, not just the war
• Gold isn't failing-it's just no longer moving on geopolitics alone.

Prathamesh Mallya, DVP Research, Commodities, AngelOne, said, "Stronge dollar, probable rise of interest rates by the US FED, forceful liquidation across global markets are leading to fall in gold prices for the past few sessions. Gold is safe haven, but the dynamics of the markets have changed. The correction can intensify towards $4000/ounce mark while MCX gold futures can move lower towards Rs 1,30,000/10 gms mark in the near future.

Sharing his insights, Manav Modi, Previous Metals Analyst, Commodities, MOFSL, said, "Gold prices have corrected sharply from recent highs near $5,200 to around $4,200, but this does not undermine its status as a safe-haven asset. Historically, gold has rallied strongly during periods of uncertainty, and ongoing geopolitical tensions like the US-Iran conflict continue to provide underlying support. However, the current phase is being dominated by rising oil and energy prices, which are amplifying inflation fears. This has shifted market expectations toward tighter monetary policy, with rising US yields and a stronger dollar index exerting pressure on gold. Additionally, the uptick in USDINR reflects broader currency volatility. As a result, inflation and liquidity concerns are currently outweighing safe-haven demand, keeping gold prices under pressure."