- By Ajeet Kumar
- Thu, 28 May 2026 02:39 PM (IST)
- Source:JND
- Gold prices fall to two-month low despite global conflicts.
- Strong US dollar, high interest rates impact gold's appeal.
- Profit-booking by investors also contributes to the decline.
Gold, traditionally considered a safe-haven asset during geopolitical turmoil, has surprisingly hit record lows despite intensifying wars and global uncertainty. This unusual trend reflects a mix of economic and market factors that have outweighed gold's conventional appeal.
Gold, traditionally considered a safe-haven asset during geopolitical turmoil, has surprisingly hit record lows despite intensifying wars and global uncertainty. This unusual trend reflects a mix of economic and market factors that have outweighed gold's conventional appeal.
Gold prices fall to a two-month low
According to news agency Reuters, gold prices fell to a two-month low on Wednesday, pressured by expectations of tighter monetary policy to fend off rising inflation, with no clear end in sight to the US-backed war with Iran.
Spot gold was down 1.3 per cent at USD 4,447.71 per ounce as of 1808 GMT, after falling to its lowest level since March 27 earlier in the session. US gold futures for June delivery settled 1.2 per cent lower at USD 4,448.40.
"The biggest influence continues to be the Middle East. There was some lingering optimism, but as this continues to drag out, that optimism wanes," said Peter Grant, vice president and senior metals strategist at Zaner Metals, adding that the ongoing conflict was heightening inflation concerns.
Tehran will restore shipping through the strait to pre-war levels within a month in a framework deal with the US that also includes the withdrawal of US forces from Iran's vicinity, Iranian state television reported on Wednesday. Gold prices briefly pared some losses after this report.
However, the market still sees energy-driven inflation prompting the US Federal Reserve to hike its benchmark overnight interest rate by 25 basis points by the end of this year. Despite being an inflation hedge, non-yielding gold struggles in high-rate environments.
Why are gold prices falling?
1. One major reason is the strengthening of the US dollar. Gold is priced globally in dollars, meaning when the greenback rises, gold becomes more expensive for foreign buyers, reducing demand. Investors often shift toward dollar-based assets, especially when the US economy shows resilience or interest rates remain high.
2. Another critical factor is elevated bond yields and central bank policies. Gold does not generate interest or dividends, making it less attractive when governments, particularly the US Federal Reserve, maintain high interest rates. Investors seeking better returns often move money into bonds or fixed-income assets instead of gold.
3. Profit-booking by institutional investors has also played a role. After a prolonged rally driven by earlier geopolitical tensions and inflation concerns, hedge funds and traders may have begun selling gold to lock in gains, accelerating price declines.
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4. Additionally, markets sometimes react differently to conflicts depending on their perceived economic impact. If wars are seen as regionally contained or unlikely to disrupt global trade significantly, panic buying of gold may remain limited. Investors may instead focus on inflation trends, interest rates, and economic growth forecasts.
What analysts say on future of gold investment
However, analysts caution that gold’s safe-haven appeal has not disappeared entirely. Any major escalation affecting oil supplies, global shipping routes, or broader financial stability could quickly revive investor demand. Gold’s current weakness, therefore, may reflect changing market priorities rather than a permanent loss of confidence in the precious metal.