West Asia war effect: Gold price slips 14% in March; what lies ahead?

Price of gold has slipped 14% since the US and Israel attacked Iran on February 28 this year. The precious metal is down by Rs 22,691 from Rs 1,61971 per 10 gm on February 27.  The yellow metal has usually surged in times of stock market crash since investors prefer to park their money into gold considered as safe haven.

But the 7758 pts or 9.54% crash in the Sensex and a 2400 points crash in Nifty since Februray 27 has not led investors running after safe haven gold this time.

The fall in gold prices is largely led by rising inflation risks, which are altering expectations around the rate cut cycle. Global markets are now pricing in a more prolonged higher interest rate environment.

A report by YES Bank has an interesting take on gold's status.

"While structurally, gold’s position as a safe-haven remains, oil has also emerged as an asset class in the wake of the crisis. If the war continues in the medium term, the positioning in gold will be a delicate balance between real yields, dollar’s direction, and on the other side, the need for a defensive investments."

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said, "From a technical and macro perspective, downside levels of $4000 and $3600 remain open in the short term. However, if there is any meaningful de-escalation in geopolitical tensions and clarity on rate cuts, gold could witness a sharp recovery, with $5000 not ruled out on the upside."

Ponmudi R, CEO of Enrich Money said, "Price action indicates a weak recovery within a broader bearish structure. Immediate resistance is placed at Rs 1,39,000–Rs 1,40,000. A breakout above this zone can trigger a move toward Rs 1,43,000–Rs 1,46,000. On the downside, Rs 1,34,000–Rs 1,35,000 acts as immediate support. A break below this can extend the fall toward Rs 1,30,000. The bias remains slightly negative in the near term."