Gold's War Connection Fades as Inflation, Rates Gain Importance

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

The report noted that the first half of the year showed that geopolitical risks alone may not be enough to sustain a gold rally. Investors began assessing conflicts through their impact on inflation and interest rates, rather than just the headlines themselves.

Rising bond yields emerged as the key headwind for gold, outweighing traditional safe-haven demand despite elevated geopolitical tensions, said Navneet Damani, Head of Research, Commodities at MOFSL. The US-Iran conflict provided another example of this changing dynamic.

The report expects inflation trends, Federal Reserve communication, and global liquidity to remain key drivers of gold and silver prices in the second half of 2026, alongside central bank buying, ETF flows, and speculative positioning.