Global gold and silver prices slipped on Monday (March 9) even as geopolitical tensions in the Middle East intensified, puzzling investors who usually expect precious metals to rally during periods of conflict.
On the COMEX, gold fell about 1.3% to around $5,090 per ounce, while silver dropped sharply by more than 4% an ounce, reflecting profit booking and broader market stress.
The decline comes even as the conflict involving Iran, Israel, and the United States continues to escalate, driving oil prices sharply higher and rattling global financial markets.
Profit booking after a strong rally
One of the key reasons for the fall in precious metals is investor profit booking after gold’s extended rally in recent months.
Market participants who accumulated gains during gold’s climb are now selling part of their holdings to cover losses in equities and other assets, as global stock markets decline amid rising geopolitical uncertainty and energy prices.
“Gold prices in global markets are influenced at the moment by geopolitical developments as the Middle East situation remains intense and has not subsided even after a week of combat,” said Joseph Thomas, Head of Research at Emkay Wealth Management.
He noted that volatility in precious metals has increased significantly during this period.
Surging oil prices triggering inflation worries
At the same time, crude oil prices have surged sharply.
Benchmark Brent crude jumped about 17% to above $108 per barrel, marking one of the biggest daily gains since the pandemic, while WTI crude climbed close to $107.
The spike is largely tied to concerns over potential disruptions to energy shipments through the Strait of Hormuz, a key corridor for global oil supplies.
Higher oil prices tend to fuel global inflation, which complicates the outlook for central banks.
Rising yields and stronger dollar weighing on metals
Another factor pressuring precious metals is the strengthening US dollar and rising bond yields.
Investors seeking liquidity during market stress have moved toward the dollar, while US Treasury yields have edged higher amid concerns that persistent inflation could delay interest rate cuts by the Federal Reserve.
A stronger dollar typically makes gold more expensive for buyers holding other currencies, reducing demand.
War-driven volatility, not a clear trend yet
Analysts say the current movement reflects short-term volatility rather than a fundamental shift in gold’s outlook.
Thomas added that once geopolitical tensions ease, traditional drivers such as US interest rate expectations and the direction of the dollar will likely become the dominant forces shaping precious metal prices.
For now, however, markets remain highly sensitive to developments in the Middle East, with investors balancing safe-haven demand against the need to raise cash during broader market turbulence.
-With Reuters inputs