Why gold’s safe-haven rally is fading despite rising tensions in Middle East

Gold has long been regarded as the ultimate safe-haven asset during geopolitical turmoil. Historically, wars, military escalations, and global crises tend to trigger strong rallies in the precious metal as investors seek to protect wealth and hedge against uncertainty. Yet rising tensions involving Iran and Israel have produced a somewhat unusual market response. Instead of a sustained surge, gold prices have turned volatile and, in some sessions, even slipped. 

Market analysts say a combination of macroeconomic forces is counteracting gold’s traditional safe-haven appeal, creating a tug-of-war between geopolitical demand and financial market dynamics. 

How strong dollar is weighing on gold 

One of the biggest factors limiting gold’s rally is the strength of the US dollar. In times of global uncertainty, investors often flock to both gold and the dollar as safe assets. However, when the dollar strengthens sharply, it tends to pressure gold prices because the metal is globally priced in dollars. 

A stronger dollar makes gold more expensive for buyers using other currencies, dampening international demand. As a result, even when geopolitical tensions rise, the currency effect can offset the metal’s safe-haven appeal and limit upward momentum. 

Is rising yields reducing appeal 

Another major hurdle has been rising bond yields. Unlike bonds, gold does not generate any income or yield. When government bond yields rise, the opportunity cost of holding gold increases, prompting investors to shift funds toward income-generating assets. 

Expectations that interest rates may remain elevated for longer, particularly amid signals from the Federal Reserve, have pushed real yields higher. When real yields rise, investors often move away from non-yielding assets such as gold and towards fixed-income securities offering stable returns. 

Another reason behind gold’s recent weakness is market positioning. The metal had already rallied strongly in the months leading up to the latest Middle East crisis, driven by central bank purchases, persistent inflation concerns, and expectations that interest rates could eventually fall. With prices already near record highs, the outbreak of conflict prompted some investors to lock in gains rather than initiate fresh buying. 

Why oil rally drawing investor focus 

The crisis has also sparked a sharp jump in crude oil prices amid fears of potential supply disruptions in the Middle East. As oil prices surge, markets often shift focus towards inflation risks and energy supply dynamics. Gold sometimes takes a secondary role as the immediate geopolitical risk premium is absorbed by energy markets. 

Ponmudi R, CEO of Enrich Money, said the broader commodities basket has entered the week with heightened volatility as rising tensions trigger sharp movements across energy and precious metals. 

Why commodities remain volatile

“Despite intermittent intraday reversals and bouts of profit-taking, the overall trend structure remains bullish. Gold and silver have moved closer to record highs before witnessing mild pullbacks, while crude oil has surged sharply on fears of supply disruptions,” he said. 

According to Ponmudi, participation has intensified around breakout levels, though elevated volatility suggests traders should remain cautious. Gold and silver continue to demonstrate resilient demand supported by safe-haven flows, while crude oil has broken out of a consolidation phase to test multi-month highs. Natural gas has also shown early signs of stabilisation with a modest rebound, though it remains sensitive to weather patterns and inventory data. 

Despite recent volatility, the broader trend for gold remains constructive. COMEX gold futures are now trading at $5,158–$5,181, holding above key support levels near $5,000–$5,100. Analysts say the bullish structure remains intact, supported by persistent central bank buying and geopolitical uncertainty. 

In India, MCX gold has also maintained a strong uptrend, breaking above ₹1,65,000 and moving toward the ₹1,69,000–₹1,70,000 resistance zone. If prices remain above ₹1,65,000, analysts expect the upward momentum to remain intact. 

Meanwhile, silver has seen even stronger gains. COMEX silver futures recently closed around $84, supported by strong industrial demand from sectors such as solar energy and electronics. On the domestic exchange, MCX silver has surged past ₹2,85,000 and is approaching the ₹3-lakh mark. 

Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, said gold recently traded in a volatile range between ₹1,59,500 and ₹1,60,000. “Market focus is now on key US economic data, including the unemployment rate and non-farm payroll numbers. With crude prices already soaring, gold is witnessing volatile moves as markets price in the effects of the war in West Asia,” he added.