Gold and Silver Prices Under Pressure Amid Geopolitical Tensions and Inflation Fears
Gold and silver prices have experienced rangebound trading in recent weeks, particularly since the escalation of the US-Israel-Iran conflict. While gold is traditionally viewed as a safe-haven asset, the surge in oil prices and its inflationary impact have limited gains for precious metals. According to YES Bank's latest report, gold's structural role as a safe-haven remains intact, but oil has also emerged as a significant asset class during this crisis. If the conflict persists in the medium term, positioning in gold will depend on a delicate balance between real yields, the direction of the US dollar, and the ongoing need for defensive investments.
Central Bank Purchases: A Key Uncertainty
A major uncertainty in the gold market is whether the robust demand from central banks observed in 2025 will continue into 2026. In 2025, central banks accumulated gold to diversify their reserves, but according to a World Gold Council report, net purchases dropped to just 5 tonnes in January 2026, compared to an average of 27 tonnes per month in the previous year. YES Bank notes that while buying interest from central banks may persist this year, the pace is expected to moderate relative to 2025.
Oil Gains Prominence as an Asset Class
Although gold retains its structural appeal as a safe-haven asset, oil has gained prominence as an investment class amid the current geopolitical crisis. YES Bank emphasizes that if the conflict continues over the medium term, positioning in gold will likely hinge on a careful interplay between real yields, the US dollar's direction, and the sustained demand for defensive assets.
Outlook for Gold and Silver Prices
YES Bank's report provides a mixed outlook for gold prices. Historically, gold has performed well during periods of stagflation, and such risks are currently building. However, for the immediate term, technical analysis indicates a bearish bias. A daily close below USD 5000 per ounce could confirm a breakout toward USD 4600-4400 per ounce, while this scenario would be invalidated if prices rise above USD 5150 per ounce.
Current Market Pressures
Gold and silver extended their decline on Thursday, pressured by mounting concerns over global inflation. Gaurav Garg, Research Analyst at Lemonn Markets Desk, noted that escalating geopolitical tensions related to the ongoing US-Iran conflict have heightened fears of oil supply disruptions, which could further intensify inflationary pressures.
Recent Trading Performance
Dilip Parmar, Senior Research Analyst at HDFC Securities, reported that gold prices have dropped to their lowest levels since early February. This decline is attributed to the US Federal Reserve's hawkish outlook and sustained outflows from gold exchange-traded funds over the past five sessions. He highlighted that as energy-driven inflation looms, it remains a primary concern for central bankers, keeping pressure on gold as bond yields climb.
International Market Trends
In the international market, gold prices fell below $4,700 per ounce, signaling weakness after the US Federal Reserve decided to keep interest rates unchanged in the 3.5-3.75% range. Fed Chair Jerome Powell's hawkish commentary on inflation has stoked fears that the US central bank is unlikely to cut rates more than once this year. A lower interest rate environment typically benefits gold prices, making this scenario a critical factor for future trends.
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