Gold's Traditional Safe-Haven Status Threatened by Changing Market Dynamics

The traditional relationship between gold and geopolitical conflicts is changing, according to a report by Motilal Oswal Financial Services Ltd. In its H1 2026 Precious Metals Report, the company said that inflation, interest rates, and monetary policy are increasingly becoming important drivers of bullion prices.

Navneet Damani, Head of Research, Commodities at MOFSL, noted that 'H1 2026 demonstrated that the relationship between war and gold has become increasingly conditional.' Markets have shifted focus from geopolitical headlines to their impact on inflation, real interest rates, and monetary policy expectations.

Rising bond yields emerged as a key headwind for gold, outweighing traditional safe-haven demand despite elevated geopolitical tensions. The US-Iran conflict provided another example of the changing dynamic, where initial escalation supported bullion demand, higher oil prices raised inflation concerns, and reduced expectations of monetary policy easing, limiting gains in gold.

The report expects inflation trends, Federal Reserve communication, and global liquidity to remain key drivers of gold and silver in the second half of 2026. MOFSL also expects gold to retain medium-term strength but sees scope for a 6-8 per cent correction from current levels before a potential move towards $4,800 per ounce.