Gold scorched in the fires of war! Prices plummet to 29,000. Why is the magic of safe havens crumbling?
Whenever a global war breaks out, people flock to gold for a safe investment. But this time, the West Asian war is playing out in the opposite direction. A strong dollar and heavy cash demand have dimmed gold's luster. As a result, gold prices have plummeted by 18 percent, or nearly 29,000 rupees.
Typically, whenever a war-like situation arises in the world, investors first turn to gold. It has always been considered the safest investment, or a "safe haven." However, amid the intense tensions in West Asia,
the situation is changing this time. Despite the ongoing war between the US, Israel, and Iran for the past 24 days, gold prices have plummeted. The yellow metal has fallen by nearly 18 percent, with the price per 10 grams falling by nearly ₹29,000.
On one hand, crude oil prices have surpassed $110 per barrel, shaking global markets. Under such circumstances, gold prices should have skyrocketed,
but on Monday, they fell more than 5% to their lowest level since 2026. This has proven to be the worst week for gold in the last 43 years. It is crucial for the average investor to understand why this is happening.
Gold's sheen diminished due to rising dollar dominance
Currently, the biggest pressure on gold is the rising strength of the US dollar. In times of geopolitical uncertainty,
investors are not only flocking to gold but also investing heavily in the dollar, which is considered more reliable. The US Dollar Index (DXY) was at 97 in mid-February, and by mid-March, it had risen to 100.15.
Since gold is traded in dollars in the international market, a strengthening dollar makes it more expensive for investors holding other currencies, reducing its demand. Furthermore, rising crude oil prices have raised fears of inflation worldwide.
Investors are withdrawing investments to secure their money in this panic. Last week, the US Federal Reserve also kept interest rates stable at 3.5% to 3.75% in its policy meeting.
The Fed's hawkish stance clearly indicates that it is in no hurry to lower interest rates, which has reduced gold's attractiveness.
Impact of the 2025 boom
To understand this Great Fall, we need to go back a bit. Even before the war in West Asia began, gold had already made investors rich. In 2025 alone, gold prices jumped an extraordinary 70%. After this meteoric rise, gold prices were already quite high.
As the war fueled market volatility and panic, investors chose to secure profits by selling their old gold rather than buying new gold at higher prices.
According to market experts, profit-booking is common when an asset makes such a significant and rapid jump. Investors prioritized protecting their earnings over taking on new risks.
Cash becomes king in times of crisis
During times of significant market volatility, investors often prioritize cash. Gold is one of the few assets in the world that can be quickly sold for cash. These days, people are selling their gold en masse to cover losses incurred in the stock market or elsewhere.
The best example of this is being seen in Dubai. Many Non-Resident Indians (NRIs) living there are selling their gold in a frenzy amid this war.
According to local jewelers, since the region became engulfed in tension, more than 100 customers have been arriving daily to sell gold.
People are willing to sell their jewelry and gold biscuits even at a discount to raise cash and send the money safely home (to India) if needed. Traders there are purchasing approximately one kilogram of gold daily from such customers alone.