It was nearly two months ago when the West Asian conflict began on February 28. It was expected that gold and silver prices will see a runaway rise. However, their recent underperformance amid recent conflict between the US-Israel and Iran may seem counterintuitive, but reflects a shift in what truly drives markets today.
Geopolitical tensions alone are no longer enough to sustain a rally in precious metals as macro forces are firmly in control.
The most important factor has been the strength of the US dollar. In times of uncertainty, investors typically split between gold and the dollar as safe havens. This time, the dollar has clearly won. A stronger dollar makes gold and silver more expensive globally, suppressing demand and capping price gains.
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At the same time, elevated interest rates have raised the opportunity cost of holding non-yielding assets like gold. With bond yields remaining high (US 10 Y at 4.36%), investors are increasingly favouring income-generating instruments over traditional stores of value. The surge in oil prices (Brent Crude at around $111 per barrel), triggered by the conflict, has reinforced inflation concerns and reduced the likelihood of near-term rate cuts, keeping yields higher for longer.
This has created what can be described as an “oil shock paradox.” While inflation is typically supportive for gold, in the current environment it is leading to tighter monetary expectations and a stronger dollar—both of which are negative for precious metals in the short term.
Liquidity dynamics
Liquidity dynamics have also played a role. In volatile markets, investors often sell gold and silver to raise cash or meet margin calls, creating temporary downward pressure on precious metals.
Additionally, much of the geopolitical premium had already been priced in, with gold hitting elevated levels before the conflict intensified. The subsequent phase has been characterized by profit-taking rather than fresh inflows.
Silver, meanwhile, has faced additional headwinds due to its industrial exposure. Concerns around global growth, particularly amid rising energy costs, have weighed on its demand (including its industrial demand) expectations, amplifying its weakness relative to gold.
The broader takeaway is clear: the interplay of interest rates, currency strength, and liquidity is now the key driver of precious metal prices, not geopolitics in isolation.
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For gold and silver to regain momentum, markets will need to see a shift in these macro conditions—particularly a softer dollar and a clearer path toward monetary easing. Until then, safe-haven demand alone is unlikely to be enough.
Gold price outlook: Gold is expected to remain structurally supported over the next two to four quarters, with prices likely trending higher amid continued central bank buying, macroeconomic uncertainty, and evolving interest rate expectations. While short-term volatility may persist, the broader range for gold is seen between $4,500 and $5,500, with upside risks in a stress scenario. While writing this piece, the Gold MCX was quoted 1.04% down at ₹1,50143 for 10 grams.
Silver price outlook: Silver, on the other hand, is likely to be more volatile, tracking gold’s direction but with sharper swings due to its dual role as both a precious and industrial metal. Prices are expected to remain in the $65 to $95 range, with potential upside if industrial demand strengthens alongside the precious metals cycle. Silver was traded at ₹2,37045 per kilogram on the MCX.
Overall, the outlook remains constructive for both metals, with gold acting as a stable hedge and silver offering higher beta exposure in a volatile environment.
Apurva Sheth is the Head of Market Perspectives and Research, SAMCO Securities. Views are his own.