The precious metal initially jumped by over ₹8,500 in a single day on March 2, however, as the war intensified, it began a massive downward spiral. (REUTERS)AI Quick Read
US dollar vs gold: The ongoing US-Iran war has triggered a strategic shift in safe-haven demand as investors are now flocking towards the US Dollar instead of gold, according to market experts.
Despite the US being directly involved in the war, the dollar index has rebounded strongly after falling nearly 10% in 2025, reinforcing its status as a dominant currency during periods of geopolitical uncertainty. The dollar index has risen over 2% in March 2026.
Whereas, gold prices have slipped over 10% since the beginning of the US-Iran war. The precious metal initially jumped by over ₹8,500 in a single day on March 2, however, as the war intensified, it began a massive downward spiral. By March 23, gold had crashed to ₹1,35,846, a drop of roughly 14.3% from its start-of-war peak.
“Gold has struggled to reclaim its traditional safe-haven status in the near term, as rising US yields and a firm dollar have weighed on investor demand. In fact, higher yields tend to redirect capital towards interest-bearing assets, diminishing the relative attractiveness of non-yielding bullion,” said Sugandha Sachdeva, Founder of SS WealthStreet.
According to Sachdeva, a key factor underpinning this trend is the continued relevance of the petrodollar system, wherein global oil trade remains largely denominated in dollars.
As oil is the world’s most traded commodity, nations are compelled to hold and transact in dollars to secure energy supplies, thereby structurally supporting demand for the currency, she explained.
Ongoing supply disruptions—especially the persistent blockade of the Strait of Hormuz—have triggered a sharp rise in crude oil prices. This has, in turn, boosted demand for the US dollar, as countries need to hold larger reserves to cover higher energy import costs.
"Adding to this dynamic is the fact that the US, now a net oil exporter, is relatively insulated from such disruptions, unlike energy-dependent regions such as Europe and Asia.
Moreover, expectations of a higher-for-longer interest rate environment in the US, driven by inflation risks stemming from elevated oil prices, are further supporting the dollar. Strong macroeconomic data and resilient labor markets strengthen the Federal Reserve’s ability to maintain a tighter policy stance, enhancing the appeal of dollar-denominated assets," Sachdeva said.
Adib Noorani, an independent market expert, believes that gold is the go-to asset during times of global conflict. However, when geopolitical tension specifically causes oil prices to spike, a different economic chain reaction occurs that currently favors cash.
“As long as soaring oil keeps inflation fears alive and bond yields high, the US Dollar possesses a fundamental advantage that allows it to briefly overshadow gold as the ultimate safe haven,” Noorani said.
Meanwhile, Sachdeva of SS WeathStreet said that this dominance of the dollar may not be permanent and structural risks are gradually emerging.
She further opined that rising geopolitical assertiveness by the US, including tariffs, sanctions, reserve freezes, and military interventions, has begun to erode global confidence in the dollar-centric system. Additionally, mounting fiscal pressures and a growing debt burden raise questions about the long-term sustainability of dollar strength.
The market expert believes that in such a scenario, gold is unlikely to lose relevance. While it may temporarily underperform during phases of dollar strength and elevated yields, it continues to serve as a strategic hedge against systemic risks, currency debasement, and geopolitical fragmentation.
“The US dollar may be outperforming gold as a safe haven in the current environment of rising oil prices and geopolitical stress. However, over the longer term, structural vulnerabilities in the dollar-based system could revive gold’s appeal, reinforcing its role as a timeless store of value in an increasingly fragmented global financial order,” Sachdeva said.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
Vaamanaa covers business and stock market news. Started in 2020, she has been producing news on digital platforms for over 4.5 years now. She writes on markets, commodities, IPOs, and industry. She has worked for news channels like Jagran New Media and Business Insider India. You can reach out to her at vaamanaa.sethi@htdigital.in.