Gold's traditional safe-haven appeal during geopolitical conflicts appears to be changing, with inflation, interest rates and monetary policy now playing a bigger role in determining bullion prices, according to a report by Motilal Oswal Financial Services Ltd (MOFSL). In its H1 2026 Precious Metals Report, MOFSL said the first half of the year showed that geopolitical tensions alone may no longer be enough to sustain a gold rally.
Safe-Haven Relationship Now 'Conditional'
MOFSL's analysis, carried in The Times of India's live coverage of gold and silver rates, found that investors increasingly assessed conflicts based on their potential impact on inflation, interest rates and monetary policy expectations. Navneet Damani, head of research, commodities at MOFSL, said markets are paying less attention to geopolitical headlines themselves and focusing more on how conflicts could affect inflation, real interest rates and expectations around monetary policy.
The relationship between war and gold has become increasingly conditional. — Navneet Damani, MOFSL
Rising bond yields emerged as the key headwind for gold, outweighing traditional safe-haven demand despite elevated geopolitical tensions. — Navneet Damani, MOFSL
While conflicts historically prompted investors to pile into gold as a store of value, the H1 2026 experience, according to MOFSL, suggests that markets now scrutinize the inflation impulse of any geopolitical event. A conflict that raises inflation expectations could support gold, while one that lifts bond yields and real interest rates could pressure prices. This conditional relationship, Damani explained, is why markets are paying less attention to geopolitical headlines themselves and more attention to how conflicts feed into monetary policy expectations.
Key Drivers for Gold and Silver Prices
| Driver | Role in bullion prices |
|---|---|
| Geopolitical tensions | Traditional safe-haven trigger, now conditional on macro impact |
| Inflation | Bigger role in determining bullion prices |
| Interest rates and monetary policy | Bigger role; rising bond yields are the key headwind |
| Market attention | Investors focus on conflict effects on inflation and rates, not headlines |
According to MOFSL, the first-half experience showed that geopolitical tensions alone may no longer be enough to sustain a rally. Rising bond yields, in particular, weighed on gold despite elevated geopolitical tensions, indicating that fixed-income competition is now overshadowing traditional safe-haven flows.
What This Means for Commodity Market Participants
For commodity traders, procurement teams and analysts tracking gold and silver, the MOFSL report points to a repricing of how geopolitical risk is traded:
- Geopolitical headlines should be evaluated through their likely transmission to inflation expectations and central bank policy, rather than treated as automatic buy signals for bullion.
- Inflation data releases and interest-rate expectations may carry more weight for gold price direction than conflict escalation alone.
- Bond yield movements, as highlighted by MOFSL, need to be monitored as a competing driver against safe-haven demand.
- The conditional war–gold relationship means that the same geopolitical event can produce different price outcomes depending on the prevailing inflation and rate environment.
The Times of India's live blog on gold and silver rates noted that precious metals may continue their rally, with US inflation and Iran tensions among the factors in focus. MOFSL's H1 2026 analysis adds a cautionary layer: any sustained rally would depend on how those factors influence inflation, real interest rates and monetary policy expectations, per the report's findings.
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