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Experts attribute the global economic uncertainty caused by the tariffs imposed by US President Donald Trump’s administration as the primary reason behind the recent spike in gold prices.
In the domestic market, gold breached the psychological level of Rs 1 lakh per 10 grams, while gold prices hit a fresh record high of 3,500 dollars per ounce in the international market on Tuesday.
Experts say gold is considered a ‘safe-haven’ asset by investors worldwide, and they tend to move their investments into gold in the event of economic, political, or financial instability.
Anuj Gupta, Product Head, Commodities and Currency, HDFC Securities says, “the main reason is Donald Trump’s tariff policy. We have seen that after putting lots of tariffs on different nations, the ‘safe haven’ demand of gold has increased. We have seen the major role played by the US-China trade war, due to this we see that many small economies and investors are looking towards gold as a safe-haven asset”.
In the first four months of the current calendar year, the price of the yellow metal has spiked by close to 29%, compared to the 22% growth it experienced during the last full year. Here are some reasons behind the spike:
The ongoing global tariff and trade war has led to a surge in demand for gold by investors, fund managers, and central banks alike. There is also a surge in demand for gold through Gold Exchange-Traded Funds, or ETFs, as these funds are attracting higher investments.
Recent fluctuations in the values of major currencies, including the US dollar and the euro, have prompted businesses to invest in gold to hedge their currency assets. Gold prices have also risen in the domestic market due to the ongoing marriage season, which typically leads to a spurt in gold demand. US investors are also importing large quantities of gold from the international market to hedge against a potentially higher tariff regime once the 90-day pause announced in global tariffs imposed by the US comes to an end.
Vandana Bharati, Head, Commodity Research, SMC Global Securities Limited said, “Because of fear of a hike in tariff, the US has imported a lot of gold from China, from London, from other countries. So, it has opened the arbitrage window between other countries and the US. So, it is the physical rush of gold which is leading to a spike in gold prices”.
India is the second-largest gold market in the world, after China. Gold demand in the country in 2024 stood at just over 802 tonnes, compared to 761 tonnes in 2023.
According to a World Gold Council report, the value of total gold demand in India increased by 31 per cent in 2024, compared to 2023.
Published on April 24, 2025
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