Gold prices staged a sharp recovery on Tuesday, rising more than 3% to around $4,820 per ounce, as bargain hunting emerged after two days of dramatic sell-offs. The rebound came after the precious metal had suffered one of its steepest declines in over a decade, with prices sliding nearly 5% in the previous session and extending Friday’s slump.
Why gold fell sharply before rebounding
The recent sell-off in gold was triggered by a sudden shift in market expectations around US monetary policy. Prices tumbled after news broke that US President Donald Trump had nominated Kevin Warsh as the next Chair of the Federal Reserve. Warsh is widely viewed as more hawkish compared to other contenders, prompting fears that the US central bank could pursue tighter monetary policy for longer.
Those concerns led to a sharp repricing across global markets, pushing bond yields higher and strengthening the US dollar. As a result, gold—typically sensitive to interest rate expectations—came under intense pressure, marking its steepest fall in more than ten years.
However, the decline proved short-lived. As prices corrected sharply, investors stepped in to buy the dip, triggering a strong rebound in bullion prices.
Bargain hunting and safe-haven demand return
The recovery in gold reflects renewed bargain hunting after the steep correction, alongside persistent safe-haven demand. Despite the recent volatility, underlying support for gold remains intact.
Strong central bank purchases continue to underpin prices, as monetary authorities diversify reserves amid global economic and fiscal uncertainty. In addition, the so-called “debasement trade”—where investors rotate into physical assets such as gold to hedge against currency weakness and rising debt levels—has remained a key structural driver.
Concerns around global uncertainty and questions over the Federal Reserve’s independence have also reinforced gold’s appeal as a store of value. These factors have helped cushion downside risks and supported the sharp bounce seen in the latest session.
MCX gold futures reflect the rebound
In India, MCX gold futures mirrored the global recovery. The continuous gold contract traded sharply higher, reflecting both the international price rebound and domestic buying interest. The move comes after a period of intense volatility, during which gold prices had corrected sharply from record highs.
While near-term price action remains sensitive to global cues such as US monetary policy expectations and dollar movements, the broader trend continues to be influenced by safe-haven flows and central bank demand.
India–US trade deal provides a positive domestic backdrop
Adding to the positive sentiment for India, President Donald Trump on Monday announced a trade deal with India that significantly lowers US tariffs on Indian goods. Under the agreement, the United States will slash tariffs to 18% from as high as 50%, in exchange for India halting Russian oil purchases and lowering trade barriers.
Trump announced the deal on social media following a call with Prime Minister Narendra Modi, stating that India would now buy oil from the US and potentially Venezuela. He also said that India has committed to “BUY AMERICAN at a much higher level,” including purchasing more than $500 billion worth of US energy, such as oil and coal, along with technology, agricultural, and other products.
According to Trump, India will also move to reduce its tariffs and non-tariff barriers against the United States to zero, marking a significant shift in bilateral trade relations. Until Trump returned to office and raised US tariff rates to double-digit levels last year, India had some of the world’s highest tariffs, with a simple applied rate of 15.6% and an effective applied tariff of 8.2%, as per World Trade Organization data.
What this means for gold and Indian markets
The India–US trade deal is being viewed as a positive macro development for India, with potential implications for currency stability, trade flows, and investor sentiment. Improved trade relations and reduced tariff uncertainty could support the Indian rupee and domestic financial markets over time.
For gold, the impact is more nuanced. While stronger risk sentiment and trade optimism can sometimes reduce local safe-haven demand, global factors—such as US monetary policy uncertainty, fiscal concerns, and geopolitical risks—continue to dominate gold’s price direction.
Outlook
Gold’s sharp rebound highlights how quickly sentiment can shift after extreme market moves. While volatility is likely to remain elevated in the near term, the metal continues to find support from central bank buying, safe-haven demand, and long-term concerns over currencies and fiscal stability. At the same time, the India–US trade agreement adds a constructive domestic backdrop, even as global factors remain the primary drivers of bullion prices.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Stock market and commodity investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions. Author or Business Upturn is not liable for any losses arising from the use of this information.
