Gold Faces a Twin Blow: India’s Tariff Wall and a Red-Hot US Economy Squeeze Safe-Haven Demand

The precious metal is rewriting its traditional crisis playbook. While tensions in the Middle East continue to escalate—Iran has broken off indirect talks with Washington, threatened to block the Strait of Hormuz and Bab al-Mandab, and oil prices have surged as much as 8%—gold has failed to catch a bid. Instead, the spot price stumbled to $4,520.20 an ounce, down 1.09% from Friday’s close of $4,569.90.

The biggest single drag on physical demand comes from India, the world’s second-largest gold consumer. New Delhi hiked its import duty from 6% to a punishing 15%, a move that immediately sent local premiums into reverse and pushed physical gold prices in the country to a steep discount versus theoretical import costs. That chokes off a vital source of Asian buying just when the broader market could have used the support.

Across the Atlantic, the economic data delivered an equally unwelcome surprise for bullion bulls. The ISM manufacturing index jumped to 54.0 in the latest reading, marking the highest level since May 2022 and beating expectations handily. The S&P Global US Manufacturing PMI followed suit at 55.1. A resilient economy takes the pressure off the Federal Reserve to ease policy anytime soon—and in gold’s case, that is a direct headwind.

The FedWatch tool now prices in a 40% probability of a 25-basis-point rate hike by December. Rising rate expectations boost the dollar, and a stronger greenback makes gold more expensive for overseas buyers. The greenback has been behaving more like a safe haven itself during this latest geopolitical shock, crowding out the traditional flight-to-safety bid for bullion.

Should investors sell immediately? Or is it worth buying Gold?

So why isn’t gold rallying on the obvious geopolitical risks? The market is interpreting the Iran-US confrontation not as a security crisis but as an inflation shock. Higher oil prices reinforce fears of stubbornly elevated consumer prices, shifting the narrative back to monetary tightening. At current levels, gold is still 17% below its January record of $5,450, with annualized volatility hovering near 19%—a sign that traders are torn between two opposing forces.

Underneath the short-term noise, the structural case for gold remains intact. Central banks stayed net buyers in the first quarter, adding 244 tonnes globally—a 3% increase year-on-year. China trimmed its holdings of US Treasuries to the lowest since 2008, while the Royal Mint reported a 94% jump in sales of gold products, underscoring sustained appetite for physical metal among retail investors.

Technically, the picture offers little immediate relief. The price sits 2.57% below its short-term moving average, and the next upside hurdle is pegged at $4,829.59. The relative strength index at 49.8 is neutral, leaving room for further downside before oversold conditions emerge.

Gold at a turning point? This analysis reveals what investors need to know now.

For now, gold remains trapped between two poles: geopolitical uncertainty that should be supportive, and a US economy so resilient that it keeps rate-hike expectations alive. The next major catalysts—US jobs data and Fed communication—will determine whether the inflation impulse from the oil spike proves durable or fades. Until the dollar and yield pressure abates, the metal may stay range-bound well below its January highs.

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