Why are Gold and Silver down despite the US-Iran-Israel conflict?

Escalation of geopolitical tensions between the United States and Israel with Iran in early March 2026 has added significant volatility in the global financial market. However, in a surprising turn of events, gold and silver prices have been falling in recent times despite having high volatility in the global financial markets.This counterintuitive movement has perplexed investors, especially in India, where gold and silver are not only an investment instrument, but also hold a cultural and financial store of value. In this blog, we will explore the reason for the fall in gold and silver prices despite the US-Iran war.Gold and Silver price trends in March 2026The price of global spot gold fell by 1.7% to $5,082.51 per ounce, and US gold futures for April dropped by 1.4% to $5,09.409 per ounce. While in the domestic market, the MCX Gold rate dropped by 0.96% to Rs. 160,077 per 10 grams.A similar trend was seen in the silver prices as well, where the global silver spot prices dropped by 2.2% to $82.50 per ounce, while in the domestic market, the MCX silver prices fell by 2.67% to Rs. 2,61,135 per kg.These fluctuations show that, though geopolitical tensions caused some demand for precious metals, other macroeconomic forces were the dominant forces in price movements.There were several reasons that led to the decline in the gold and silver prices despite the US-Iran conflict. Some of them are:Strengthening the US DollarOne of the major reasons for the decrease in the price of gold and silver is the increase in the US dollar. Precious metals get priced in dollars, and this means that with the rise in the dollar, gold and silver become more expensive for investors who hold other currencies, such as the Indian Rupee.During the Iran conflict, the US dollar has strengthened due to the rise in energy prices and the global capital flows into US assets. This reduced the demand for bullion despite the geopolitical uncertainty.A strong dollar is often inversely related to gold. Investors prefer to hold dollar-denominated assets when there is an appreciation of the currency, making non-yielding assets such as gold and silver less attractive.For Indian investors, this process becomes even more complicated since gold prices in India also depend upon the rupee-dollar exchange rate.Rising US bond yields and interest rate expectationsAnother important factor that is weighing down on the price of gold and silver is the rise in US Treasury yields. When yields for US bonds increase, foreign investors switch investments from non-yielding assets like gold to interest-bearing investments.During the first half of March 2026, the US 10-year Treasury yield hit a one-month all-time high, which raised the opportunity cost of gold.Markets also began to revise their expectations of interest rate cuts by the US Federal Reserve. As investors are expecting the US Federal Reserve to keep interest rates steady, this will further strengthen the dollar and dampen the demand for precious metals.Historically, gold investment performs best when interest rates are low, as then investors look for alternatives to invest their funds. In contrast, an increase in bond yields often triggers corrections in gold and silver.Oil price rise and inflation concernsThe escalation of the US-Iran conflict triggered sharp price movements in global energy markets. Oil prices spiked due to fears of supply interruptions in the Strait of Hormuz, which is one of the most important oil shipping routes in the world.The rising crude oil prices also pushed inflation expectations higher and strengthened the US dollar, indirectly putting pressure on gold and silver prices.Higher inflation is sometimes beneficial for gold and silver prices, but when it results in expectations of tighter monetary policy or later rate cuts, it can have a negative effect on precious metals, which happened in this case.Additionally, the high volatility in the energy markets diverted investor attention from bullion to other commodities, such as crude oil and agricultural products, due to the potential closure of key shipping routes.Profit Booking After Record HighsAnother reason that plays a significant role in the decline of gold and silver prices is profit booking. Precious metals had already enjoyed a significant rally in the months preceding the conflict.Earlier Gold and silver were at record highs at the end of 2025 and early 2026. When geopolitical tensions increased, many investors took advantage of the situation to realise their profits rather than initiating new positions. As a result, the anticipated rush to safe havens did not translate into sustained price gains.Such corrections are common after strong rallies, and especially after markets have already priced in geopolitical risks.Mixed signals about the duration of the conflictMarket reactions to geopolitical events are often dependent on whether investors anticipate that conflicts will further escalate or resolve quickly in a short time.In March 2026, there was uncertainty about the duration of the US-Iran confrontation after contradictory comments by global leaders. In some instances, it signalled potential de-escalation, which brought a reduction in the safe-haven demand of gold and silver.When investors think that geopolitical tensions may diminish, they will move their capital back into equities and other assets, leading to a decline in precious metal prices.Outlook for Gold and SilverDespite the recent decline, the long-term outlook for precious metals is positive. Many analysts believe the structural drivers supporting precious metals, such as central bank purchases, geopolitical uncertainty and inflation risks, remain intact, driving their demand.Some forecasts predict that gold may trade in the $5,500 - $6,000 range by the end of 2026, provided that global economic uncertainties continue. Silver also has strong industrial demand from industries like renewable energies and electronics, which could play an important role in supporting silver prices in the long term.Wrap upThe decline in gold and silver prices during the US-Iran conflict in March 2026 underscores that modern commodity markets are influenced by a complex interaction of macroeconomic variables rather than geopolitics alone.While geopolitical conflicts often increase demand for safe-haven assets, factors such as a stronger US dollar, rising bond yields, profit booking after record highs, and fluctuating expectations about interest rates have weighed on precious metals.For Indian investors, the key takeaway is that gold and silver prices do not always rise during geopolitical crises. Instead, they are influenced by broad financial conditions, including currency movements, global liquidity, and investor sentiment.

Why are Gold and Silver down despite the US-Iran-Israel conflict?

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