Gold's Price Shifts from Geopolitics to Inflation and Interest Rates

Gold's traditional relationship with geopolitical conflicts is weakening as inflation, interest rates, and monetary policy expectations increasingly determine its price. According to Motilal Oswal Financial (MOFSL), investors are assessing conflicts through their impact on inflation, real interest rates, and monetary policy.

The brokerage said that bond yields, central-bank decisions, and global liquidity have become more important factors for gold prices than geopolitical headlines alone. MOFSL noted that the market narrative changed as tariffs added to production costs and raised inflation expectations, making higher-for-longer interest rates possible.

Rising Treasury yields and the dollar created a headwind for bullion, even with elevated geopolitical tensions. Navneet Damani, Head of Research, Commodities at MOFSL, said that rising bond yields outweighed traditional safe-haven demand. He added that the relationship between war and gold had become increasingly conditional in the first half of 2026.

The US-Iran conflict provided another example of this changing dynamic, with initial escalation supporting bullion demand but higher oil prices increasing inflation concerns and reducing expectations of monetary policy easing.