In turbulent times, why isn’t gold shining?

As Russian soldiers gathered on their country’s borders with Ukraine at the beginning of 2022, investing in gold seemed a safe bet. Gold, after all, was the safe haven in turbulent times. When Russian soldiers crossed into Ukraine in February, conventional wisdom was proved right again as gold prices rose.

By end-September, however, gold prices measured in US dollars had fallen for the sixth straight month. “In a sense, it’s counterintuitive,” says Somasundaram PR, managing director of the India office of World Gold Council.

WGC’s research shows that conventional wisdom didn’t account for the heft of modern central banks. War and inflation did nudge up gold prices initially. Then, the largest synchronised increase in interest rates by central banks in recent memory, catalysed an appreciation in the dollar against other major currencies. The combination of rising interest rates on risk-free government bonds and an appreciating dollar edged out gold as a safe haven in uncertain times.

“Gold becomes more relevant in the current scenario and is performing its roles,” rationalises Somasundaram. “Other factors have an overwhelming short-term impact,” he adds.

Gold trade is largely denominated in USD. The positive spin-off for gold buyers outside the US, is that as their domestic currency depreciated against the dollar, it offset the fall in the dollar price of gold. Turkish customers received a neat return on their gold investments as their currency fell far more than the gold price.


In India, the world’s second largest consumer of gold at about 800-900 tonnes a year, inflation may influence demand. At least 80% of gold demand is from jewellers. The ongoing festival season is traditionally the best period for gold sales.

Inflation, however, looms large this year. “Demand remains good but inflation is also a factor that could squeeze wallet share,” feels Somasundaram.