Gold Prices Plummet Amid Iran Conflict: An Unexpected Trend

Gold prices have surprisingly dropped nearly 13% since the start of the Iran conflict, defying expectations of it being a safe-haven asset. Analysts attribute this decline to a combination of profit-taking after record highs and competition from other low-risk investments. Despite the current volatility, gold remains significantly higher than a year ago, indicating a strong long-term trend. This article explores the factors influencing gold's performance, including its historical behavior during geopolitical crises and its recent fluctuations in India. Discover the insights behind this unexpected market movement.

By Narendra Chaudhary Mar 28, 2026, 13:15 IST

Gold's Unexpected Decline During the Iran War

Since the onset of the Iran conflict, gold prices have dropped nearly 13%, which has taken many investors by surprise, as they typically regard gold as a safe-haven asset in times of crisis. Deutsche Bank Research noted this unusual trend, stating that the weakness of gold is one of the most unexpected market movements during the ongoing war.

What factors are contributing to this decline? Analysts suggest a combination of reasons. Earlier this year, gold prices had already reached record levels, making them susceptible to profit-taking. Additionally, other low-risk investments are vying for the attention of investors. Furthermore, gold does not always respond predictably to geopolitical tensions. Campbell Harvey from Duke’s Fuqua School of Business explained that gold does not necessarily react uniformly to every geopolitical crisis.

Market conditions are also evolving. Adam Turnquist, chief technical strategist at LPL Financial, mentioned that gold can sometimes diverge from established trends and behave independently. Despite the current downturn, the long-term outlook for gold remains robust, as prices are still significantly higher than they were a year ago, reminding investors that fluctuations are a normal part of the market cycle.

From Record Highs to Corrections: Understanding Gold's Market Movements

In January, gold reached an unprecedented high of nearly $5,600 per ounce. Although it has since retreated to around $4,490, this price is still nearly 50% above last year's levels, indicating strong long-term growth despite recent instability. The rapid increase in prices has made gold susceptible to corrections. Harvey pointed out that after reaching record highs, bullion often experiences muted or negative returns.

Historically, gold has served as a safe-haven asset, rising during eight of the last eleven significant market downturns since the late 1980s. However, Harvey warned that its reliability as a safe haven can be inconsistent.

Gold's Performance in India Amid the Iran Conflict

As of March 2026, gold prices in India have shown significant volatility, fluctuating between Rs 1,40,000 and Rs 1,67,000 per 10 grams. Despite the ongoing conflict, the metal experienced a sharp global decline of 18% in late March as investors opted for cash and reacted to rising US interest rates, temporarily disrupting the typical 'war-time rally' trend.