Gold and Silver Prices Stabilize as Trump Postpones Military Action on Iran

Gold and Silver Prices Crash on March 23 Amid Escalating War in the Middle East

Key Highlights:

• Gold prices on the MCX plummeted by as much as 10% to below ₹130,000 per 10 grams.
• Silver futures tanked almost 12% and slipped below ₹2,00,000 per kilogram.

The gold and silver prices took a sharp beating on Monday, March 23, as the escalating war in the Middle East further stoked crude oil prices, raising fears of inflation and higher for longer interest rates by the US Federal Reserve. The selloff was visible in both the domestic and international markets.

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The steep decline in gold and silver prices is being attributed to rising inflation concerns and a surge in crude oil prices, which have weighed on the global economic outlook. Additionally, a stronger US dollar and higher bond yields have triggered liquidity-driven selling, reducing gold's appeal as a safe-haven asset. Analysts note that the sell-off has been driven largely by forced liquidation and cash-raising by institutional investors, particularly from the Gulf region.

In times of heightened uncertainty, investors often sell highly liquid assets like gold to raise cash, rather than holding them as safe havens. This should not be interpreted as a failure of gold as a hedge, but rather as a phase where liquidity stress temporarily overrides its defensive appeal. According to Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, this is a temporary phase and gold will regain its appeal as a safe-haven asset once liquidity stress subsides.