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Generally, whenever there is a war situation in the world, investors first run towards gold. It has always been considered the safest investment i.e. 'safe haven'. But this time the Ganga is flowing in reverse amid the ongoing heavy tension in Western Asia. Despite the ongoing war between America, Israel and Iran for the last 24 days, a severe fall in gold prices has been recorded. The yellow metal has fallen by about 18 percent, the price of gold per 10 grams has dropped by about Rs 29,000.

On one hand, crude oil prices have crossed $110 per barrel, which has shaken the global markets. In such circumstances, the price of gold should have skyrocketed, but on Monday it fell by more than 5% to its lowest level of 2026. This has proven to be the worst week for gold in the last 43 years. It is very important for a common investor to understand why this is happening.

The increasing dominance of the dollar reduced the shine of gold.

At present, the biggest pressure on gold is due to the increasing strength of the US dollar. In times of geopolitical uncertainty, investors are not only running towards gold, but are also investing heavily in the dollar because it is considered more reliable. In mid-February, the US Dollar Index (DXY) was at the level of 97, which has jumped to 100.15 by mid-March.

Since gold is traded in dollars in the international market, the strengthening of the dollar makes gold very expensive for investors in other currencies. Due to this its demand decreases. Apart from this, rising prices of crude oil have created fear of inflation across the world. In this panic, investors are withdrawing investments to secure their money. Last week, the US Federal Reserve also kept interest rates stable at 3.5% to 3.75% in its policy meeting. The tough stance of the Fed clearly indicates that at present there is no hurry to reduce interest rates, due to which the attractiveness of gold has reduced.

Effect of 2025 boom

To understand this great fall, we have to go back a little. Even before the war started in Western Asia, gold had made investors rich. In the year 2025 alone, gold had made an extraordinary jump of 70%. After this tremendous rise, the prices of gold had already become very high.

In such a situation, when instability and panic increased in the market due to the war, investors thought it better to ensure profits by selling their old gold instead of buying new gold at a higher price. According to market experts, when an asset makes such a long and sharp jump, then profit booking is a very common thing. Investors preferred to keep their earnings safe rather than taking new risks.

'Cash' becomes king in crisis

In times of great turmoil in the market, investors often give the most importance to cash. Gold is one of the few assets in the world which can be sold immediately to get cash. These days, people are selling their gold on a large scale to compensate for the losses incurred in the stock market or elsewhere.

The best example of this is being seen in Dubai. Many Non-Resident Indians (NRIs) living there are selling their gold indiscriminately amid this war. According to local jewellers, since this area has come under the grip of tension, more than 100 customers are coming every day to sell gold. People are also ready to sell their jewelery and gold biscuits at a discount, so that they can collect cash and send the money safely to their home (India) when needed. The traders there are buying about one kilo of gold every day only from such customers.

Along with this, the continuous increase in US treasury yields has also dulled the shine of gold. When government bonds start giving good returns without any risk, investors start moving away from assets like gold (which do not earn any fixed interest).