War Rages, But Gold Stays Calm: Why Prices Aren’t Surging in India

Gold prices in India have remained relatively steady even as tensions continue to escalate in West Asia, a situation that would normally push investors toward safe-haven assets like bullion. Market trends show that a mix of weak jewellery demand, strong global currency movements and ample domestic supply is preventing a sharp rise in prices.

Strong Dollar Reduces Gold Demand

One of the key reasons for the muted price movement is the strength of the United States Dollar. When the dollar strengthens, gold becomes more expensive for buyers using other currencies, which reduces demand in major consumer markets such as India.

This currency effect has offset the typical surge in gold buying that often occurs during geopolitical conflicts.

High Prices Slow Jewellery Purchases

Jewellery demand in India has also weakened after a significant rally in global gold prices over the past year. The surge in prices was partly driven by global economic uncertainty following tariff measures introduced by Donald Trump, which increased investor interest in safe-haven assets.

As a result, gold ornaments have become more expensive for consumers, turning purchases into more planned decisions rather than routine spending.

Retailers in Zaveri Bazaar, one of India's largest jewellery trading hubs, have reported a noticeable slowdown in sales. Some smaller stores have experienced significant declines in jewellery volumes, while profit margins have also tightened.

Ample Domestic Supply Keeps Market Stable

India's gold market currently has sufficient supply after a surge in imports earlier this year. According to data from the India Bullion and Jewellers Association, the price of 999-purity gold in Mumbai rose slightly from ₹15,802 per gram on February 26 to ₹15,855 per gram on March 13.

At the same time, the country's gold imports increased sharply at the start of the year, providing jewellers with ample inventory. Because of this comfortable supply, dealers have been offering discounts to jewellery manufacturers instead of charging premiums.

Supply Disruptions in Global Bullion Hubs

The conflict in West Asia has also affected bullion trading in the United Arab Emirates, particularly in Dubai, a major global gold trading centre. Transport disruptions and flight restrictions have affected the movement of gold shipments.

While traders in Dubai are offering discounts against the London Bullion Market Association benchmark due to logistical challenges, Indian buyers have not been able to fully benefit from these lower prices because shipping routes remain constrained.

Inflation Concerns and Interest Rates

Another factor influencing the market is concern about rising inflation linked to energy prices during the conflict. If inflation increases, global interest rates could remain elevated for longer periods, which generally reduces the appeal of gold as an investment because it does not generate interest income.

Outlook for the Indian Gold Market

In the short term, gold prices in India are expected to move within a narrow range as demand for jewellery remains weak and supply levels stay comfortable. However, market conditions could change once festive and wedding season demand returns, which typically boosts gold buying across the country.