For investors seeking refuge amid global turmoil, the usual hiding places are no longer safe. The ‘safe-haven’ assets that shielded investors for the past 18-odd months wilted as the Iran-Israel-US war intensifies. In fact, both precious metals fell more than equities.
Nippon India ETF Gold BeES, the country’s largest gold ETF (exchangetraded fund), has shed 18% since 2 March, even as the Nippon India Silver ETF has lost 27%. Comparatively, the BSE Sensex fell 9% as of 23 March. After this fall, the corrections in gold and silver from their 29 January peaks extended to 22% and 44%, respectively, before rebounding slightly. Have the precious metals lost their charm? Or is this correction an opportunity to invest more?
Gold, silver can’t escape global tensions
Macros dent safe-haven appeal
Gold and silver saw a spectacular rally in 2024 and 2025, helping shield investor portfolios from market dislocations triggered by tariff wars and regional conflicts. Both precious metals initially seemed to benefit from the rising “geopolitical risk premium” embedded into their prices. Later, speculative and momentum-driven flows drove the two to dizzying heights. But now, just as geopolitical tensions have intensified further, the script has flipped. Both gold and silver have buckled under the mounting stress, marking a behavioural shift from the traditional pattern in which safe-haven assets tend to rally during turmoil.
To be sure, the geopolitical risk premium has not faded. But emerging macro conditions are now proving a bitter pill, along with the liquidation of hot money. Specifically, the US Treasury yield is weighing on gold and silver prices. As the conflict in West Asia rages on, disruptions to oil supplies have pushed prices higher. This has stoked inflation concerns, prompting markets to reassess expectations for rate cuts. This has led to a spike in US Treasury yields and is pushing the dollar higher. Both are negative for gold and silver. Higher bond yields increase the opportunity cost of holding non-yielding assets. When 10-year US Treasuries start yielding 4-5% risk-free, money flows reallocate immediately. In simple words, when bond yields rise and the dollar strengthens, money moves away from gold and silver, which pay no interest or dividends.
Further, profitable positions in precious metals get liquidated as market players rush to meet margin calls. Siddharth Srivastava, Head-ETF Product & Fund Manager, Mirae Asset Investment Managers (India), says, “While geopolitical developments typically support safe-haven demand, the recent event appears to have triggered near-term unwinding in gold positions, likely driven by liquidity needs and asset rotation.”
That is why the usual low correlation of gold with equity markets has broken down. N.S. Ramaswamy, Head of Commodity, Ventura, remarks, “Gold is facing an unusual dynamic. It is benefiting from fear of the geopolitical tensions but suffers from the economic ramifications of that same fear.” Jigar Trivedi, Senior Research Analyst at IndusInd Securities, comments, “Geopolitical tensions continue to underpin gold, but recent price action shows they are not enough to drive a sustained rally. Macro factors, particularly real yields, the US dollar and interest rate expectations, remain the key constraints on further upside.”
Safe havens not immune to flare-up
Precious metals’ slide undermines their diversifier tag. What upset precious metals
War-led disruption sent oil, energy prices soaring
Inflation fears led to markets reassessing rate cuts
Higher US Treasury yields, stronger dollar weaken safe haven appeal
Money flows shifted away from nonyielding assets
Positions liquidated to meet margin calls
No longer safe havens?
Gold’s low correlation with markets works in long term
But this can break in times of extreme stress
After recent sharp runup, mean reversion was expected
Gold retains role of diversifier, silver remains a tactical call
We all fall down
Both gold and silver are typically used as diversifiers in investors’ portfolios. Their low correlation with equities often provides a buffer against market volatility. Now, if the portfolio diversifiers are not immune to extreme uncertainty, does the asset allocation argument fall apart? Experts maintain that the breakdown in this correlation does not necessarily mean that gold and silver have lost their safe-haven status.
Anish Teli, Managing Partner at QED Capital Advisors, insists that gold shows low correlation in the long term, but not during extreme stress. “Usually, gold is a safe haven during economic stress, but the context matters— how bad the stress is and what is driving it,” he says.
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Karan Aggarwal, Co-founder & CIO, Ametra PMS, points out that war and geopolitical risk were already priced into valuations of precious metals, taking the goldsilver ratio from near 100 at the beginning of 2025 to around 44 by end-January 2026. The gold-silver ratio represents the number of silver ounces needed to purchase one ounce of gold, serving as a key indicator of relative value between the two metals. Traditionally, once the gold-silver ratio reaches 40-50, precious metals take a breather till the gold-silver ratio is back at 80 again. “We are in a cooling-off phase where gold and silver are looking at a liquidation cycle to create space for the next leg of the rally,” Aggarwal observes. He adds that news flow can create short-term disruption, but long-term pricing trends always respect the fundamentals.
Srivastava avers, “Going forward, while return expectations may moderate, gold continues to present a reasonable investment case at current levels, particularly as a portfolio diversifier.”
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10-year US bond yield Soaring energy prices push up bond yields, hurting precious metals.
What investors should do now?
The correction is a reality check for investors in gold and silver ETFs and funds. Like all market-linked assets, prices tend to revert to historical averages. Gold and silver are now going through such a phase.
Existing investors must remain calm and not lose faith in asset allocation. Experts favour gold ahead of silver, but neither is cheap even after the correction. Srivastava insists, “At current levels, investors may look to add gold and silver in their portfolio in a staggered manner, though gold looks relatively attractive on a risk-reward basis.” Sahil Kapoor, Head of Product and Market Strategist at DSP Mutual Fund, asserts, “Most investors are better off only in gold.” Kapoor advises that investors should continue systematic investment plans (SIPs) in gold, but not silver, as it is not a monetary asset.
