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Informist, Tuesday, May 12, 2026

MUMBAI – Gold, which has long been regarded as a safe-haven investment particularly in times of crisis, has behaved differently in recent months. Since the US-Iran war began on Feb. 28, the yellow metal's price has fallen around 12%, which is counterintuitive for the crisis hedge asset.  

However, ING Economics said in a research note that this recent underperformance does not subvert the role of gold as a safe-haven asset. "Gold's safe-haven role is not in question. However, recent months have shown that short-term price action can still be dominated by macro forces – particularly real yields, the dollar and expectations for Fed (US Federal Reserve) policy. Once those headwinds begin to ease, gold's underlying support should reassert itself," it said. Accordingly, it has forecast gold prices to rise to $5,000 per ounce by the end of the current calendar year. At 1303 IST, the most-traded June gold futures contract on COMEX was trading at $4,707.4 per ounce, down 0.45% from its previous close. 

The recent sell-off in gold reflects the macro consequences of the shock rather than a breakdown in gold's safe-haven role, ING Economics said on Monday.

Gold's safe-haven appeal tends to perform best in times of a financial crisis or during growth shock, when real yields fall and the dollar weakens. But a supply-driven energy shock does the opposite. "Higher oil prices push inflation up, keep central banks on hold and strengthen the dollar, all of which weigh on gold. High liquidity also makes it a source of funds when investors need to cover losses elsewhere," it said.

Central banks have been major buyers of gold in recent months. According to the World Gold Council, central banks turned sellers of gold in March, with net sales of 30 tonnes. Turkey led the selling, cutting its holdings by 60 tonnes as part of efforts to support foreign exchange liquidity. Its net sales in January-March totalled 79 tonnes. Buying remained concentrated, with Poland adding 11 tonnes in March and 31 tonnes year-to-date, the data showed.

However, on aggregation, demand for gold by central banks has been rising. In Q1 (Jan-Mar), central bank demand was up 17% quarter-on-quarter, despite an uptick in sales, with Poland and Uzbekistan leading the buying, the research note said. The National Bank of Poland was once again the largest purchaser, increasing its gold reserves by 31 tonnes over the quarter to 582 tonnes. "This points to a slower but still positive trend in official sector demand, with reserve diversification remaining supportive for gold over the medium term," it said.

Exchange Traded Funds witnessed net outflows in March, weighing on prices since the conflict began. However, early signs suggest positioning is beginning to shift. Global gold ETFs recorded roughly $6.6 billion of inflows in April, flipping from March outflows, according to World Gold Council data.

"Holdings remain well below the November 2020 peak, leaving room for a significant rebuild. ETF flows track Fed expectations closely – Fed easing should be a catalyst for renewed inflows in the second half," ING Economics said.

Going forward, several factors could decide the direction of gold price movement. "The path higher depends on energy prices easing, inflation cooling and the Fed cutting (rates) in the second half of the year. Central bank buying and recovering ETF flows provide additional support," it said.  End

US$1 = INR 95.73

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Abhijit Doshi

Edited by Tanima Banerjee

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