Markets are increasingly responding to inflation, interest rates, and central bank cues rather than geopolitical events, as gold’s price dynamics evolve into a more structural reserve asset, according to Motilal Oswal Financial Services.
Gold’s price story is being rewritten by markets that are now watching inflation, interest rates and central bank messaging more closely than geopolitics itself, according to Motilal Oswal Financial Services. In its H1 2026 precious metals report, the brokerage said the metal still reacts to conflict, but only when war begins to reshape expectations for inflation, real yields and policy.
Navneet Damani, head of research for commodities at Motilal Oswal, said the first half of 2026 showed that the link between war and gold has become more conditional. He added that investors increasingly judged crises not by the headlines alone but by their likely effect on bond yields and monetary policy. The report said rising yields have become a stronger drag on bullion than the traditional safe-haven bid that often follows geopolitical shocks.
The report pointed to a familiar pattern in this year’s trading. Gold opened 2026 on a strong note, helped by policy uncertainty, central bank buying, exchange-traded fund inflows and hopes of rate cuts by the US Federal Reserve. But that backdrop shifted as tariffs fed through into costs and inflation expectations, raising the prospect of higher-for-longer rates and lifting Treasury yields and the dollar. The same dynamic appeared during the US-Iran confrontation, when the initial rush into bullion was later checked by higher oil prices, firmer inflation concerns and fading expectations of easier policy.
That assessment broadly matches the World Gold Council’s Gold Mid-Year Outlook 2026, which said gold’s performance is increasingly tied to rate expectations and investor sentiment as much as to geopolitical stress. The council has also argued that gold is evolving from a short-term inflation hedge into a more structural reserve asset, with central banks, particularly in emerging markets, remaining major buyers. HSBC Asset Management has made a similar case, saying official-sector purchases are tightening available supply and helping to establish a firmer price floor.
Motilal Oswal expects those structural supports to remain in place in the second half of the year, even if volatility persists. The brokerage said inflation trends, Fed communication, global liquidity, central bank demand and fund flows will be the main variables for gold and silver. It sees the metal as vulnerable to a 6% to 8% pullback before a possible move towards $4,800 an ounce overseas and, later, above $5,500 over a 12- to 15-month horizon. Domestically, it projects medium-term levels of Rs 1.68 lakh per 10 grams and then Rs 1.93 lakh, based on a dollar-rupee rate of 95.5. Even so, the firm said central bank buying, fiscal strains and fears of currency debasement should keep the long-term outlook constructive.
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