Gold Demand Falls Amid Iran Conflict Escalation

Key Figures:

• Rs 1,59,097: Standard price of gold per 10 grams before the Iran conflict (February 27)
• Rs 1,67,471: Sharp price surge of gold on March 2 amid the Iran war
• Rs 1,58,399: Current price of gold per 10 grams, hovering at pre-war levels
• $106: Brent crude prices on Monday
• $120: Recent highs of Brent crude prices
• 92.70: Peak of the dollar index (USD/INR) against the rupee
• $5,200: Estimated price of gold per ounce in the near term, according to Augmont Bullion
• $5,250: Potential price of gold per ounce in the near term, according to Augmont Bullion

Market Analysis:

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The Iran conflict has driven precious metal prices to see-saw and the dollar to rise, leading to a sharp decline in gold demand in March. The standard price of gold stood at Rs 1,59,097 per 10 grams before the conflict, but surged to Rs 1,67,471 on March 2. However, prices have since fallen to pre-war levels, hovering at Rs 1,58,399 per 10 grams.

Jewellers' purchases have declined, and analysts attribute this to their focus on closing financial books ahead of the March financial year-end. Retail demand is not effectively moving through the supply chain, from wholesalers to retailers and ultimately to consumers.

Commodity Market Dynamics:

The dollar index (USD/INR) has inched higher against the rupee, peaking above 92.70. This has reduced demand for commodities, including gold and crude, as they become more expensive for global investors. Additionally, investors are adjusting their expectations about interest rates, making non-yielding assets like gold and silver less attractive.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Forecast:

Augmont Bullion estimates that gold could regain upward momentum and potentially move toward $5,200 (Rs 1.64 lakh) or $5,250 (Rs 1.65 lakh) in the near term, if prices manage to stabilise and rebound from current levels.