Gold Prices Shift Away from Geopolitics as Inflation and Interest Rates Take Center Stage
New Delhi: The relationship between gold prices and geopolitical conflicts has become increasingly conditional, according to Motilal Oswal Financial Services Ltd's (MOFSL) H1 2026 Precious Metals Report. The report found that investors are now focusing more on the impact of conflicts on inflation, interest rates, and monetary policy expectations rather than just the headlines themselves.
Rising bond yields have emerged as a key headwind for gold, outweighing traditional safe-haven demand despite elevated geopolitical tensions. Gold started the year strongly, supported by policy uncertainty, ETF inflows, central bank buying, and expectations of interest rate cuts by the US Federal Reserve. However, the market narrative shifted as tariffs began feeding into production costs and inflation expectations, lifting the prospect of higher-for-longer interest rates.
The report highlighted that the US-Iran conflict provided another example of the changing dynamic. The initial escalation supported bullion demand, but higher oil prices raised inflation concerns and reduced expectations of monetary policy easing, limiting gains in gold and contributing to a correction.