Gold's Relationship with Geopolitical Conflicts Evolves as Inflation and Interest Rates Gain Importance
New Delhi: A recent report by Motilal Oswal Financial Services Ltd (MOFSL) reveals that gold's traditional relationship with geopolitical conflicts is evolving, as inflation, interest rates, and monetary policy increasingly drive bullion prices.
The H1 2026 Precious Metals Report highlights that investors are now assessing the impact of conflicts on inflation and interest rates, rather than solely relying on geopolitical headlines. This shift is evident in the rising bond yields, which have become a key headwind for gold.
The report notes that despite elevated tensions, the US-Iran conflict provided another example of this 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.
Looking ahead, the report expects inflation trends, Federal Reserve communication, and global liquidity to remain key drivers of gold and silver prices, alongside central bank buying, exchange-traded funds (ETFs) flows, and speculative positioning. While near-term volatility may persist, MOFSL's Commodities Analyst Manav Modi believes that structural demand continues to support the long-term outlook for precious metals.
The report forecasts a 6-8% correction in gold prices from current levels before a potential move towards USD 4,800 per ounce and subsequently more than USD 5,500 over a 12-15-month horizon. On the domestic front, MOFSL identifies accumulation levels assuming a USD/INR rate of 95.5, with medium-term targets of Rs 1.68 lakh per 10 grams followed by Rs 1.93 lakh per 10 grams.