Is gold losing its safe-haven status during market crashes? Here's why the yellow metal has fallen 5% since March 2 

Gold, which has long been considered as a safe haven during stock market routs, is in a downward trend since March 2. Data from MCX show that the yellow metal rates which stood at Rs 1,69,605 on March 2 have fallen by Rs 8194 or nearly 5% to Rs 1,61,411 today. During the same period, Sensex shed 1,904 points and Nifty lost 559 points.

Considering the trend, the yellow metal should have surged since March 2 since investors usually park their funds in gold amid equity market routs.

For instance, during the Coronvirus lockdown in India, the stock market tumbled like a pack of cards with Sensex cracking 3,935 pts to close at 25,981 on March 23, 2020 (The day when the first lockdown was announced in India).

In March alone, Sensex lost 8829 points or 23% as Covid lockdown brought the Indian economy to a standstill.

On the other hand, gold prices rose 0.28% on MCX in March 2020, acting as the safe haven for investors during the financial crisis and market crash.

Coming back to the current scenario, where gold prices fell amid market rout, the decline in the yellow metal can be attributed to Iran war, which took investors toward the US dollar and energy markets, according to experts.

Dollar index also reached 99 mark, its one-month high on Wednesday. When the dollar strengthens, gold becomes more expensive for buyers, often leading to reduced demand and lower prices of the yellow metal.

Traders also trimmed hopes of near-term Federal Reserve rate cuts as rising oil prices stoked inflation fears. Lower interest rates prompt investors to park their funds in safe haven metals such as gold.

The fall in gold prices also signals that investors might be raising cash during periods of market stress to ensure liquidity rather than a fundamental shift in sentiment, according to a note by Morgan Stanley.

 Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said,"Gold prices have shown some pressure despite escalating war tensions, as the strengthening U.S. dollar and rising crude oil prices are increasing inflation concerns globally. Higher inflation could delay the Federal Reserve’s timeline for rate cuts, which is weighing on bullion sentiment in the short term. While geopolitical risks usually support safe-haven demand, the expectation that the Fed may keep interest rates higher for longer is currently limiting upside momentum in gold."