Bristi Dey
Due to the ongoing conflict in the middle east and West Asia, it is typical for valued assets to have a higher price. But gold, often seen as the safe haven is suffering a loss and the market is seeing a major drop in price during the war-like situation in the world. Here's what to know about the gold price drop.
Stronger US dollar
The US dollar has become even stronger with the conflict situation. Since gold and the USD holds an inverse relationship, a stronger dollar makes gold more expensive for global buyers, which typically lowers demand and prices.
High interest rate
Interest rates too hold an inverse relationship with gold prices. With the high oil demands and its prices fueling in the market, banks are now charging higher interest rates making interest-bearing assets more attractive. This reduces the appeal of gold, since it doesn’t yield any interest.
Investors selling for liquidity
In order to earn profit in other assets, investors might end up selling gold and cover their losses elsewhere. This is one of the reason that is dragging the prices of gold down.
No more safe haven
Gold is often seen as the safe haven when it comes to investments during the conflict led situations. But now it is no more a safe haven in today's market as it is competing against cash, liquidity, commodities like oil and equities in stock market.