Gold Price Surges Past Rs 1 Lakh Due Israel-Iran Conflict - Should You Buy On Dips?

Gold prices have surged to historic highs, crossing Rs 1 lakh per 10 grams in India, as the ongoing Israel-Iran conflict triggers a global rush for safe-haven assets. The sharp escalation in hostilities—marked by Israeli strikes on Iranian nuclear and energy infrastructure and subsequent retaliation—has overshadowed positive developments such as US-China trade progress and robust US job data.

The upward pressure on gold prices is primarily attributed to heightened geopolitical uncertainty, which traditionally increases the appeal of the precious metal as a store of value. According to Manav Modi, Senior Analyst – Commodity Research at Motilal Oswal Financial Services Ltd, “Gold is back in sharp focus as a safe-haven asset amid an increasingly unstable global backdrop.”

What’s Driving Gold’s Rally?

Last week, Brent crude oil prices spiked by over five per cent, amplifying concerns over inflation and economic fallout. This, coupled with aggressive military action in the Middle East, jolted global markets. Though upbeat US data, including better-than-expected non-farm payrolls and cooler inflation figures, had initially capped gold's momentum, the geopolitical shock quickly reversed investor sentiment.

In addition, the People’s Bank of China continued to expand its gold reserves for a seventh consecutive month, suggesting firm institutional demand for bullion even amid macroeconomic volatility.

Global investors now face a difficult balancing act: strong US economic indicators may delay expected rate cuts from the Federal Reserve, but geopolitical instability is pushing risk-averse participants back into gold. Futures markets are currently pricing in a 68 per cent probability of a US interest rate cut by September.

“Mixed signals from the US economy, combined with intensifying geopolitical threats, are creating a volatile landscape. The rise in safe-haven demand is clearly visible in the surge of gold prices,” said Sonal Jain, a commodities strategist at ICICI Securities.

What Should Investors Do?

Despite the rally, experts advise buying on dips, given the possibility of short-term corrections and continued uncertainty. “The strategy remains accumulation on declines. Geopolitical risk premiums tend to unwind sharply if there’s a de-escalation. But as long as the Israel-Iran situation remains tense, gold should stay well-supported,” said Modi.

Investors are also watching the upcoming US Federal Reserve and Bank of England rate decisions later this month, which may further shape the outlook for precious metals.

With risk aversion back on the rise and market participants weighing geopolitical and macroeconomic variables, gold is expected to remain volatile but resilient. For long-term investors, analysts believe maintaining a modest allocation to gold may provide a hedge against systemic shocks.