Gold prices have recently experienced a significant decline, dropping by ₹1,550 to ₹91,450 per 10 grams. This downturn is largely attributed to escalating trade tensions between major global economies, particularly the United States and China. The intensification of the trade war has heightened investor uncertainty, leading to notable fluctuations in commodity markets, including gold.
Impact of the US-China Trade War on Gold Prices
The ongoing trade dispute between the United States and China has been a central factor influencing global financial markets. Recently, the situation escalated when U.S. President Donald Trump announced a 104% tariff on Chinese imports. In retaliation, China imposed a 34% tariff on U.S. goods, effective April 10. These aggressive measures have intensified fears of a global recession, prompting investors to seek safer assets. However, the increased tariffs have also led to a stronger U.S. dollar, which typically inversely affects gold prices, contributing to the recent decline in the precious metal’s value.
Regional Demand Dynamics
In China, the heightened trade tensions have spurred increased demand for gold as a safe-haven asset. Chinese dealers reported premiums of $6 to $13 over spot prices, a significant rise from the previous week’s range. This surge indicates robust buying, particularly of freshly minted bars, as investors seek stability amid economic uncertainties.
Conversely, in India, gold demand has weakened. Consumers are anticipating further price drops and are thus holding back on purchases. Indian dealers have been offering discounts of up to $20 an ounce over domestic prices, reflecting the subdued demand. The domestic gold prices in India have seen a nearly 15% increase so far in 2025, reaching a record 91,696 rupees per 10 grams earlier in the week.
Market Reactions and Investor Behavior
The broader market sell-off, driven by recession fears due to the intensifying trade war, has also impacted gold prices. Spot gold recently fell to a 3.5-week low, with investors liquidating positions to cover losses in other markets. Despite gold’s traditional role as a safe-haven asset, the current market dynamics have led to its price decline. However, central banks, particularly China’s, have continued accumulating gold reserves, providing some long-term support for the metal.
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