Gold Prices Hit Record High Amid Iran-Israel Conflict - How Far Can the Rally Go?

Gold prices are on fire — and fear is fanning the flames. Amid a backdrop of renewed geopolitical conflict, macroeconomic uncertainty, and a plunging US dollar, investors are rushing to the time-tested safety of gold, pushing its value to a new all-time high.

On Monday, gold August futures on the Multi Commodity Exchange (MCX) surged to Rs 1,01,078 per 10 grams. Silver prices also remained buoyant, with July futures hovering around Rs 1,06,464 per kilogram.

This unprecedented rally isn't just about numbers; it's a direct reflection of global anxiety.

How Fear Moves Gold
Gold has always been seen as a “fear asset.” When war looms, economies wobble, or currencies weaken, gold gleams brighter. Here’s why:

Safe-Haven Appeal:
During crises, investors dump riskier assets like equities and move into gold, which holds value even when markets crash.

Hedge Against Inflation and Currency Depreciation:
Gold preserves purchasing power, making it an attractive store of value when inflation rises or when fiat currencies, especially the US dollar, weaken.

Geopolitical Risk Premium:
As conflicts escalate—like the recent Israeli strikes on Iranian nuclear facilities—investors price in greater risk, leading to more gold buying.

Sugandha Sachdeva, Founder of SS WealthStreet, explains: “Whenever there is any geopolitical uncertainty, investors rush towards the safety of gold and move away from risky assets. The yellow metal continues to reaffirm its position as one of the best-performing asset classes in 2025.”

The Middle East Conflict and Gold’s Latest High
The renewed Israel-Iran conflict has acted as a fresh trigger. Military strikes and rising tensions have made markets nervous about a broader war in the Middle East, which could destabilise the global economy and disrupt oil supply routes.

This sense of instability has created the perfect storm for gold.

“The latest upswing has been fueled by renewed conflict in the Middle East, particularly the Israeli strikes on Iranian nuclear infrastructure, which have significantly increased global risk aversion,” said Sachdeva.

Falling Dollar, Rate Cut Bets Boost Gold
Another major driver is the weakening US dollar. The dollar index has tumbled from 110.18 in January to a three-year low of 97.60. At the same time, inflation in the US cooled more than expected, with May CPI at 2.4%, raising hopes of interest rate cuts.

“The accelerated slide in the dollar index is acting as a key catalyst for driving gold prices upward,” noted Sachdeva. “Markets are now pricing in a 50 bps rate cut by the US Fed in 2025, possibly starting June 18.”

When interest rates fall, the opportunity cost of holding non-yielding assets like gold drops, making it more attractive.

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Central Banks Are Buying Too
Sachdeva also said that adding to the rally is strong institutional demand. Gold now comprises nearly 20% of global official reserves, overtaking the Euro as the second-most held reserve asset globally, after the US dollar.

This reflects growing confidence in gold as a long-term store of value, not just among investors, but governments.

Gold Prices: What’s Next? 
With momentum building, experts believe gold could rise even further.

“In domestic markets, gold is potentially heading towards Rs 1,05,000 per 10 grams, with near-term support at Rs 96,200,” said Sachdeva.

“Globally, if the Middle East conflict escalates, prices could surge towards $3,500/oz. A breakout could even push it to $3,590/oz.”

A Golden Year So Far
Gold is up over 27% year-to-date in India
In international markets, it has gained over 30% YTD, setting multiple record highs
Since 2016, gold has delivered a CAGR of 13.16%

As fear continues to dominate the global landscape, the yellow metal has cemented its position as the go-to asset for protection, preservation, and performance.