Why Gold Prices are Trading Higher Amid Geopolitical Tensions?

Gold prices are nudging upward again, fuelled by rising geopolitical tensions, though not as sharply as some might anticipate given the escalating unrest. On Thursday (June 19), gold posted modest gains in international markets and held steady in India, as safe-haven demand picked up following intensified friction between Israel and Iran.

However, any substantial rally in gold continues to be tempered by expectations of a more cautious US Federal Reserve, which has signalled fewer interest rate cuts ahead.

What's Fueling the Upside in Gold?

Geopolitical Tensions in the Middle East

Gold often acts as a refuge in times of conflict and uncertainty. The renewed hostilities between Israel and Iran — accompanied by the US military’s increased presence in the region — have unnerved investors and pushed them toward the safety of precious metals.

Global Economic Uncertainty

Beyond the Middle East, broader global concerns — from persistent inflation to trade tensions and uneven economic growth — are also driving gold’s appeal as a hedge against instability.

Also Read: Gold and Silver Prices Trade Lower: Check Rates in Your City on June 19, 2025

What’s Holding Prices Back?

While geopolitical concerns are lifting gold, the US Federal Reserve’s cautious approach to monetary easing is proving to be a headwind. The Fed has kept interest rates steady in the 4.25%–4.50% range and hinted at a slower trajectory for rate cuts.

Higher interest rates typically reduce the demand for non-yielding assets like gold. This makes the interest-bearing instruments, such as bonds, more attractive. The resulting strength in the US dollar also puts downward pressure on gold prices.

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