Why Is Gold Falling When It Should Be Rising Due To Tariff Fears?

While gold is traditionally perceived as a safe-haven asset during times of crisis or geopolitical tensions and its prices are expected to rise at such a time, it is behaving unusually, despite market conditions being favourable for the yellow metal.

Gold Prices Fall

In the last two trading sessions, gold prices have fallen over 4%, with a loss of 3% on Friday (April 4) alone. Spot gold also declined by 0.3% reaching $3,027.90 per ounce, which is its lowest point since March 13.

The Indian markets also followed suit, with the price of 24-carat gold as its rate dropped down to Rs 90,650 per 10 grams. Gold prices then marginally rose 0.73% on April 8, 2025, to Rs 87,740 for 23-carat.

Why Are Gold Prices Falling?

The United States President Donald Trump has gone around imposing a slew of tariffs around the world and this has not just demoralised investors and shaken their confidence but has also triggered concerns of inflation as well as tensions of a potential trade war.

This has led central banks to take aggressive actions, and the recent sell-off of suggests a shift in dynamics. Analysts say that institutional investors may be selling off gold to raise cash to meet margin calls in other asset classes which are also facing significant losses.

The 34% reciprocal tariff that Trump has imposed on China to which China has retaliated, has unexpectedly hit various asset classes, including commodities. China has also imposed export restrictions on rare earth metals, while heightening the risk-off sentiment.

Despite the current situation, the falling gold prices suggest that the markets are susceptible to a wider correction, including in traditional safe assets.

Goldman Sachs has increased its forecast for US Federal reserve rate cuts to 130 basis points in 2025, up from the last projection of 105 bps, due to the economic impact of the ongoing trade war. However, Fed Chair Jerome Powell said that the central bank is "in no hurry" to cut rates, market expectations suggest otherwise.

Investors are also opting for the dollar as a safe-haven asset in these times, instead of gold, as per a Reuters report.

What Do Experts Say?

According to John Mills, an analyst from Morningstar in the US, a significant drop of 38% is predicted in the next few years. In case this forecast holds true, then there is a possibility for gold prices to fall further to Rs 55,000 per 10 grams in India and $1,820 per ounce globally.

Additionally, factors such as increased supply, declining demand and market saturation are also contributing to the decline in gold prices, Mills explained. Further, the supply of recycled gold is also ubiquitous.

According to a survey by the World Gold Council, 71% of central banks are planning to either reduce or maintain their gold holdings.

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