Why wars in the world affect gold prices. How will the end of wars affect gold prices?

MerryGold Jewelry, News, Diamonds& Gems, Jewelry2 weeks ago30 Views

Gold is best known in financial markets as a “safe-haven” asset. When wars, geopolitical tensions, and uncertainties rise, investors flee riskier assets and turn to gold to protect their capital. Therefore, if major wars or conflicts around the world were to end, safe-haven demand could drop significantly—and in theory, gold prices could fall.

However, there are many other factors that determine gold’s price:

Inflation and Real Interest Rates
– When inflation rises, real interest rates (nominal rates minus inflation) generally fall, making gold more attractive.
– The end of wars might prompt central banks to tighten monetary policy (i.e., raise rates), which would raise real yields and lessen gold’s appeal.
Central Bank Purchases
– In recent years, many countries have been buying gold to diversify their reserves. These official purchases can support demand even if geopolitical risks ease.
– Emerging-market central banks in particular may continue increasing their gold holdings.
Exchange Rates and the U.S. Dollar
– Gold is typically priced in U.S. dollars. A stronger dollar makes gold more expensive in other currencies, which can dampen demand.
– Peace and a faster global economic recovery could strengthen the dollar.
Investor Psychology and Speculative Flows
– When risk appetite rises (e.g., equities become more attractive), some money may flow out of gold.
– Yet funds, ETFs, and hedge funds often keep gold in portfolios for diversification.
Physical Demand (Jewelry and Industrial Use)
– Jewelry demand tracks economic growth and consumer confidence. If peace boosts spending, jewelry demand could rise and help support prices.