Kochi: It is quite normal for gold prices across the world to rise during geopolitical conflicts. When the West Asia conflict began last week, the market expected prices to soar and set new records. However, even as the Iran conflict spread to other Gulf countries, gold prices didn’t rise and instead fell.

On March 1, one of the first days of the conflict, international markets were closed, yet gold in Kerala increased by ₹3,200 per sovereign. Contrary to expectations, prices fell on Sunday. In the following days, further price hikes were anticipated, but for the past four days, gold prices in the state have been declining.

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Why is gold pricing declining?

The fall is attributed to the strengthening of the dollar and investors selling gold for cash, despite factors that could have supported higher prices. When the dollar gains strength, buying gold using other currencies becomes more expensive, reducing demand, even in India, which is a significant gold importer. On Wednesday, the rupee suffered a sharp setback against the dollar, plunging to 92.18. Additionally, when markets face intense pressure, investors tend to sell gold.

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Economists believe this dip in gold prices is temporary. Central banks in West Asia may increase their gold purchases, and rising crude oil prices could improve the financial positions of these countries, motivating them to boost their gold reserves.