Gold Price Falls 4% in March Amid US-Iran Conflict and Heightened Inflation Concerns

Gold Prices Undergo Correction Amid Geopolitical Tensions

Overview

The price of gold has declined by more than 4% in March, despite a confluence of factors that could potentially drive the metal's value higher. These factors include a full-scale war between the US, Israel, and Iran, increased geopolitical risks, sticky inflation, and faltering economic growth.

Market Trends

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US Gold Futures have shed ₹3,000 (2%) per 10 grams this month, according to MCX data. The decline is attributed to a strong rise in crude oil prices, which has strengthened the US dollar and capped gold's upside. Additionally, fading expectations of rate cuts by the US Federal Reserve this year have also contributed to the decline.

Market Analysis

According to Hareesh V, head of commodity research at Geojit Investments, gold is losing its safe-haven shine due to overpowering financial and macroeconomic pressures. Vandana Bharti, head of commodity research at SMC Global Securities, notes that traders have shifted towards higher-beta trades such as crude oil, which has become the primary beneficiary of the conflict.

Drivers of the Correction

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The correction in gold prices is driven by a combination of factors, including:

• Strong dollar due to a sharp jump in crude oil prices
• Higher yields
• Flight-to-liquidity
• Profit booking
• Inflation fears
• Uncertainty around the war's impact

Outlook

An end to the US-Iran war is unlikely to spark a major correction in gold prices, as market behavior shows that broader macro trends continue to dictate sentiment rather than any perceived war premium. If tensions ease, some safe-haven premium could unwind, leading to short-term correction or consolidation rather than a sharp decline.