Gold prices surged sharply and touched a peak even before the Iran–Israel war began, with markets initially expecting the conflict to push prices higher. Instead, gold has been trending lower since the fighting started.
Commodity expert Shyam Sundar said fears of higher crude oil prices and prolonged cooking gas shortages are dominating sentiment. Rising oil costs can lift freight expenses and fuel inflation, making central banks less inclined to cut interest rates.
He added that the chances of rate hikes increase in such an environment. Higher interest rates typically reduce liquidity in markets, which can weigh on gold prices.
Another factor is profit-booking by investors who entered gold earlier and are now locking in gains. Sundar also noted that some investors appear to be shifting from gold into dollars to build dollar holdings, pushing the dollar index higher.
At present, he said gold has fallen about $1,000 from its peak and then recovered around $200 in trading. If the Iran–Israel war continues, profit-taking could persist and pull prices lower, while a ceasefire or peace agreement could help arrest the decline.
