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The article analyzes the impact of China's retaliatory tariffs on gold prices, particularly focusing on the Multi Commodity Exchange (MCX) in India. Gold futures on the MCX experienced a significant drop, exceeding ₹2,800, following China's announcement of a 34% tariff on goods from the United States. The June 2025 gold futures contract closed at ₹88,130 after Friday's trading session, reflecting substantial profit-taking amid escalating global trade war concerns. The analysis highlights that gold prices declined by 2.17% to ₹88,099 per 10 grams on Friday, contrasting with the previous commodity market close of ₹90,057. Globally, spot gold prices also witnessed losses of 2.4%, reaching $3,041.11 per ounce, as investors responded to the stock market downturn by selling off gold, traditionally considered a safe-haven asset. Commodity market experts suggest that gold prices are likely to face continued downward pressure as geopolitical tensions ease, which would reduce the demand for safe-haven investments. Jateen Trivedi, VP Research of Commodity and Currency at LKP Securities, attributes the decline in gold prices to profit-booking following the tariff announcements, as markets had already factored in the potential impact of reciprocal trade tariffs in previous months. According to Trivedi, the tariff premium is now largely discounted, and further downside pressure may emerge with the easing of geopolitical tensions, particularly concerning Russia-Ukraine and the Middle East conflicts. This reduction in global uncertainty could lead to a decrease in the demand for safe-haven assets like gold. Technically, Comex gold prices face significant resistance in the $3,120 to $3,130 range, while immediate support is located around $3,050 to $3,055. A breach below this support level could trigger further selling pressure in the near term. Sugandha Sachdeva, the founder of SS WealthStreet, points out that the recent rally in gold prices faces global headwinds due to the ongoing trade war between the United States and other nations, including China. Sachdeva notes that selling pressure has emerged despite persistent global trade disruptions. President Trump's decision to exclude gold and silver from tariffs has alleviated supply-side anxieties, which is reflected in rising Comex inventories amid concerns of higher import tariffs. Additionally, retail demand has softened following a substantial 19% price rally in the preceding quarter. Gold's inability to maintain prices above the $3,120 per ounce resistance level in international markets and the ₹88,800 per 10 gram mark in the domestic markets suggests a potential pullback. Domestic prices could potentially fall to the crucial support level of ₹87,000 initially or even to ₹84,000 per kg in the coming days. A broader market sell-off has prompted some investors to reduce their gold exposure. Moreover, a strong US non-farm payrolls report for March has tempered expectations for aggressive Federal Reserve rate cuts this year. Concerns that rising tariff-driven inflation may further discourage the Fed from easing, is adding to further downward pressure on gold. The interplay of global economic factors, including trade tensions, geopolitical stability, and monetary policy, heavily influences gold prices. The article suggests a bearish outlook for gold in the short to medium term, driven by factors such as reduced safe-haven demand, profit-taking, and tempered expectations for Federal Reserve rate cuts.
The decline in gold prices is multifaceted, resulting from a confluence of factors that dampen investor enthusiasm. The initial trigger was China's tariff announcement, which spurred immediate profit-taking as markets had already factored in the potential impact of reciprocal trade tariffs. This demonstrates the sensitivity of gold prices to geopolitical events and trade dynamics. Furthermore, the reduction of geopolitical tensions, particularly in regions like Russia-Ukraine and the Middle East, has lessened the demand for gold as a safe-haven asset. Investors typically flock to gold during times of uncertainty, but the relative stability in these regions has diminished this demand. Technically, the failure of gold to sustain prices above key resistance levels, both internationally and domestically, suggests a potential pullback. The presence of strong resistance in the $3,120 to $3,130 range for Comex gold and the ₹88,800 per 10 gram mark in the domestic market indicates that buyers are facing headwinds, and sellers are gaining momentum. The analysis provided by Sugandha Sachdeva highlights additional headwinds faced by gold prices. Despite ongoing global trade disruptions, selling pressure has emerged due to Trump's decision to exclude gold and silver from tariffs, which has alleviated supply-side anxieties. This reduction in supply-side concerns has led to an increase in Comex inventories, further contributing to downward pressure on prices. Moreover, the softening of retail demand following a substantial price rally in the previous quarter also contributes to the decline in gold prices. Consumers may be hesitant to purchase gold at higher prices, leading to reduced demand and increased selling pressure. Additionally, the broader market sell-off has prompted some investors to reduce their gold exposure, further exacerbating the decline in prices. A strong US non-farm payrolls report for March has tempered expectations for aggressive Federal Reserve rate cuts this year. This factor is significant because lower interest rates typically make gold more attractive as an investment. The expectation that the Federal Reserve may be less inclined to cut rates in the near future has reduced the appeal of gold as a safe-haven asset and has contributed to downward pressure on prices. Concerns that rising tariff-driven inflation may further discourage the Fed from easing add to the downward pressure on gold prices. If inflation rises due to tariffs, the Federal Reserve may be even less likely to cut interest rates, further reducing the appeal of gold as an investment.
The interplay between these factors suggests that gold prices are likely to remain under pressure in the near term. The combined effect of profit-taking, reduced geopolitical tensions, technical resistance levels, softened retail demand, and tempered expectations for Federal Reserve rate cuts creates a bearish environment for gold. Investors should be cautious about investing in gold in the short to medium term, as the potential for further downside pressure remains significant. While gold has historically served as a safe-haven asset, its appeal is currently diminished by the prevailing economic and geopolitical conditions. The ongoing trade war between the United States and China will continue to influence gold prices, as any escalation or de-escalation of trade tensions could have a significant impact on investor sentiment and demand for safe-haven assets. The Federal Reserve's monetary policy decisions will also play a crucial role in shaping the future direction of gold prices. If the Federal Reserve maintains a hawkish stance and refrains from cutting interest rates, gold prices are likely to face continued downward pressure. Conversely, if the Federal Reserve adopts a more dovish stance and cuts interest rates, gold prices could potentially rebound. Therefore, investors should carefully monitor economic and geopolitical developments and closely follow the Federal Reserve's policy decisions to make informed investment decisions regarding gold. In conclusion, the analysis suggests that the outlook for gold prices is currently bearish, driven by a combination of factors including profit-taking, reduced geopolitical tensions, technical resistance levels, softened retail demand, and tempered expectations for Federal Reserve rate cuts. Investors should exercise caution and closely monitor economic and geopolitical developments to make informed investment decisions.
Source: Gold price outlook: How will China tariffs impact MCX gold rates? EXPLAINED