Gold Faces Twin Threats: Higher US Yields and India’s 15% Import Tariff

Gold is wrestling with a rare combination of headwinds that are proving hard to shake off. While elevated US bond yields have been the primary drag for weeks, India’s decision to more than double its import levies on the metal has added an unexpected layer of pressure. The result is a price that has slipped 6.27% over the past month, even as geopolitical tensions mount.

The spot price stood at $4,553.20 an ounce on Monday, a marginal 0.06% decline from the previous close of $4,555.80. The weekly loss stands at 4.05%, though bullion remains in positive territory for the year so far. What makes the current sell-off notable is its persistence in the face of events that would normally fuel safe-haven buying.

India Tightens the Screws on Gold Imports

New Delhi has raised the import duty on gold and silver from 6% to 15%, a move that follows Prime Minister Narendra Modi’s public call for citizens to curb their gold purchases for a year. The policy shift targets a market where gold is deeply embedded in cultural and economic life — from wedding jewellery to household savings. By making imports more expensive, the government hopes to conserve foreign exchange reserves strained by higher energy costs.

India’s monthly gold imports averaged 83 tonnes in the first part of the year, while the value of demand in the first quarter hit roughly $25 billion. The tariff hike will likely hit local jewellers hardest, but the global impact is expected to be contained as long as the bigger drivers — US interest rates and the dollar — remain the dominant forces.

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

US Yields Drain Gold’s Appeal

The yield on the benchmark US Treasury note climbed to 4.631% on Monday, its highest level since January 2025. That is a punishing environment for an asset that pays no income. With higher returns available from sovereign bonds, gold’s relative attractiveness diminishes. A strengthening dollar adds to the discomfort by making bullion more expensive for buyers outside the dollar zone.

Recent US inflation data have reinforced the view that the Federal Reserve will keep rates higher for longer. The consumer price index rose 3.8% year-on-year, while producer prices accelerated 6.0%. According to the CME Group, 97.4% of market participants now expect the Fed to hold rates steady at its next meeting, with only 2.6% pricing in a cut. That is a sharp reversal from the dovish bets seen earlier in the year.

Geopolitical Sparks Fail to Ignite a Rally

Tensions in the Middle East remain elevated. A drone attack on a nuclear power facility in the United Arab Emirates pushed oil prices sharply higher, while President Donald Trump has intensified pressure on Tehran. Iranian media describe negotiations as stalled. Normally such a backdrop would drive investors into gold, but the metal has stayed sluggish.

Other precious metals are faring no better. Silver extended its sharp losses from Friday, and both platinum and palladium moved lower. The only bright spot was in India’s domestic futures market, where a record-low rupee — hitting 96.18 against the dollar — made imported gold costlier in local currency and provided a floor for prices on the Multi Commodity Exchange.

Central Banks Offer a Backstop

The selling pressure so far has been orderly rather than panicked. Gold is trading 3.44% below its short-term moving average of $4,715.51, while the relative strength index sits at a neutral 49.8 — suggesting no oversold conditions.

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One steadying force is central-bank demand. The World Gold Council reported that purchases reached 244 tonnes in the latest quarter, up from 208 tonnes in the prior period. That buying appetite helps cushion the downside but has not been enough to reverse the trend on its own.

In the near term, everything hinges on US yields, inflation expectations, and the dollar. The FOMC minutes and preliminary US PMI figures due this week will provide the next catalysts. If they confirm sticky inflation and a resilient economy, gold will remain vulnerable. Any sign of easing price pressure, however, could give the beaten-down metal a chance to stabilise and maybe reclaim its short-term moving average — the first technical signal that the worst may be over.

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