On Monday, the price of gold fell more than 1% to trade below $3,000. As of right now, it has somewhat recovered and is trading consistently around $3,023, down 0.37 from Friday’s close. The value of gold has increased by 28% in the past year. In India, gold is currently worth Rs 90,380.
Due to worries about a global trade war, investors may have liquidated their positions to protect profits in order to pay losses or margin calls on declining asset valuations, which could have caused the initial decline in the price of gold.
As hedge funds saw the biggest margin calls since COVID-19, the price of gold dropped from its highest points ever. Prices initially spiked to a new record high of $3200/oz last week in response to US President Trump’s tariff announcements, but then fell back to below $3000 in the final two days of the week.
During times of increased risk aversion, gold usually experiences early pressure. This is a result of market participants regularly liquidating their gold holdings to offset losses in other sectors. This may not be an exception to the rule that gold recovers its losses rapidly, according to Dr. Renisha Chainani, Head of Research at Augmont.
Gold touched a lifetime high of $3,167.84 last week, driven by safe-haven inflows as President Trump announced sweeping new tariffs.
On Monday, global stocks are aiming to decline for the third straight trading day. The Nikkei was down more than 8% at the opening, the Dow shed more than 1300 points, and Nasdaq futures are down more than 5%.
The White House’s quiet and unwavering position on punitive tariffs on major trading partners are blamed for Monday’s market meltdown. Due to worries about a possible global economic downturn, Trump’s trade war escalation is generating a notable market fall. Trump’s 10% import tax is currently in force, and later this week, higher duties for numerous nations are anticipated to be imposed.
The other big concern for markets today is the warning from Fed chief Powell, who has raised concerns about tariffs, citing potential higher inflation and slower economic growth, highlighting the challenging future for policymakers.
However, there appear to be tailwinds for gold to rise in value. Allianz senior economic advisor Mohamed El-Erian warned Friday that the risk of a U.S. recession has risen to 50% due to aggressive trade policies and weak GDP.
Additionally, he noted that the Fed’s preferred inflation index, core PCE, had its biggest monthly increase in almost a year, suggesting that inflation expectations are on the rise. If the Fed continues to be tight as growth slows and yields decline, gold prices may experience a tailwind.
To determine whether inflation worries will reignite the gold market’s upward trend, this week’s CPI and Fed minutes will be analyzed.
After a significant price decline last week, silver has also started to rise again. Silver is currently up 7% over the past 12 months and is trading at about $30, up 1.6% on Monday. The current price of silver in India is Rs 85,570 for 1 kilogram.
As worries about global demand and recession risks increased due to the trade war, silver dropped below $30 an ounce last week, the lowest level since January 14th, pushing weekly losses to nearly 12%.
