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Why gold prices have remained subdued in India despite raging West Asian conflict

While geopolitical uncertainty usually shores up safe haven demand and leads to a rally in gold prices, this time round gold prices have remained relatively flat since the US and Israel commenced their war on Iran

India currently also has ample reserves of gold for the jewellery industry due to the large quantity imported in January (File)

Written by: Akash Mandal

5 min readNew DelhiMar 17, 2026 06:38 PM IST First published on: Mar 16, 2026 at 09:08 AM IST

Gold dealers and refiners in India are offering discounts of up to $80 per ounce as jewellery demand remains weak due to high prices, disruption to flight services and a strong dollar, even as the war continues to rage in West Asia. There are also sufficient gold reserves available in India for jewellers in the near term, and the conflict in the region is unlikely to significantly impact the Indian bullion market.

Normally gold rises during wars, because investors move money to “safe-haven” assets. However, the dollar has remained strong this time, making gold expensive for countries and reducing demand.

The United Arab Emirates has closed a lot of its transportation network after being caught in the middle of the ongoing war, with bombings occurring across Dubai, a global bullion hub. This has led to traders offering discounts of up to $30 per ounce on prices on the London Bullion Market Association (LBMA) benchmark as they are unable to export gold out of the country with flight routes in the city shut, Bloomberg had reported last week.

Gold is among the highest cost heads annually in India’s import bill, with the UAE among the biggest suppliers. Prices in India are influenced by the overseas prices of gold. On March 13, standard gold (999 variety) was quoted at Rs 15,855 per gram in Mumbai on March 13 as against Rs 15,802 on February 26, according to the Indian Bullion and Jewellers Association data.

Supply glut and discounts

Discounts offered by Indian bullion traders and refiners are primarily due to a supply glut and weak demand in the jewellery market. “Refiners and traders are offering $80 to the LBMA gold price to jewellery makers this week, as there is enough supply in the market and demand is lacklustre. Moreover, jewellers have enough jewellery stock and gold prices are stable, so they are not in a hurry to stock up more,” said Prithviraj Kothari, managing director of RiddiSiddhi Bullions and president of India Bullion and Jewellers Association.

Indian dealers will start charging premiums for gold instead of the discounts they are currently offering when retail demand shoots up, especially during the festive season, explained Renisha Chainani, head of research at Augmont.

Jewellery demand has been lacklustre for quite some time in the wake of the over 65% rally in gold prices since the sweeping reciprocal tariffs imposed by US President Donald Trump in April last year had led to safe haven demand skyrocketing. This rally has made jewellery more and more unaffordable for a large section, and has thus turned jewellery into a strategic and well-thought-out purchase rather than an impulsive buy or for gifting purposes.

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The Indian Express had earlier spoken to jewellers in Mumbai’s jewellery hub, Zaveri Bazar, who revealed that small retailers had seen jewellery volumes drop by up to 75% with margins being squeezed by 20–30%.

India currently also has ample reserves of gold for the jewellery industry due to the large quantity imported in January. The country’s gold imports had risen to $12.07 billion during the month from $4.13 billion in December.

Dubai market’s impact on India

Dubai’s discounted gold prices would have been beneficial for Indian traders and buyers only if the transportation issues were not a concern. However, the reason for the lower prices in the UAE is the transportation blockage itself, which will not allow Indian buyers to import this gold at an affordable rate. Thus, the Dubai market is unlikely to have a significant impact on India.

“For Indian buyers and importers, this (discounted prices in Dubai) can be marginally positive. Lower premiums or temporary discounts can reduce effective import costs for traders and refiners. However, the overall benefit may remain limited as import duties, logistics costs, and rupee–dollar movements largely determine the final landed price in India,” explained Kothari of RiddhiSiddhi Bullions.

Crude inflation vs gold

Domestic gold prices may consolidate in the near term amid weak jewellery demand. While geopolitical uncertainty usually shores up safe haven demand and leads to a rally in gold prices, this time round gold prices have remained relatively flat since the crisis in the Middle East began in late February.

“…while gold should have benefited (during this war), but since here (crude) oil is involved, people are worrying about rising inflation. If inflation rises, then interest rates (globally) will remain elevated, which is negative for gold,” explained Chirag Sheth, principal consultant for South Asia at Metals Focus. “Also, whenever we see things like a crash in the equity market, you often find people selling gold to pay for margin calls in other assets,” he added.

However, if inflation levels in the US are elevated, thus keeping interest rates high, then it is a negative for the US economy, which in turn will be positive for gold prices. Thus, Sheth expects gold to continue performing well in the long run.