Gold, typically seen as a safe-haven asset during economic turmoil, is confounding expectations by declining even amid heightened recession fears. Despite growing global uncertainties and market volatility, the yellow metal has dropped over 3% in recent sessions, briefly slipping below the $3,000 mark.
Analysts believe that institutional investors may be offloading gold to cover margin calls or raise cash amid sharp declines in other asset classes. “Demand destruction and recession risk now take centre stage,” JPMorgan Chase analysts said, while acknowledging that some metal-related tariffs could be marginally positive.
Gold had rallied over the past year due to persistent inflation concerns and central bank positioning, but the recent reversal points to a shift in investor sentiment. According to IG Market Strategist Yeap Jun Rong, profit-taking could also be a factor behind gold’s short-term weakness, though safe-haven flows are still offering some support.
Last week, global equities lost nearly $6 trillion in value, and Japan’s Nikkei dropped nearly 9% on April 7. The latest sell-off was triggered by US President Donald Trump’s steep tariff hike, which prompted a 34% retaliatory duty from China, along with export restrictions on rare earth metals.
India’s merchandise exports to the United States may also decline by USD 5.76 billion in 2025 as a result of these increased tariffs, according to a data analysis by the Global Trade Research Initiative (GTRI). The think tank projects a 6.41% drop in outbound shipments, particularly from sectors such as marine products, gold, electrical and electronics. Gold jewellery and cut and polished diamond exports, which currently face 2.1% duties, are projected to fall by USD 1.82 billion. Vehicle and auto part exports, which stood at USD 2.8 billion in 2024, could drop by USD 339.4 million.
Interestingly, gold’s weakness may signal expectations of a broader market correction that could even extend to traditional safe assets. Goldman Sachs now expects the US Federal Reserve to cut rates by 130 basis points in 2025, up from a prior forecast of 105 bps, citing the deepening economic impact of the trade war. Meanwhile, traders are pricing in a 54% probability of a Fed rate cut as early as May, despite Fed Chair Jerome Powell’s cautious stance.
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