A traditional hedge in times of crisis, gold has become a preferred option amidst growing global economic uncertainty driven by US trade war.
Published Apr 23, 2025 | 9:00 AM ⚊ Updated Apr 23, 2025 | 9:38 AM
As risk appetite among investors wanes amidst an erratic US trade war, gold, a traditional hedge in times of crisis, has become a preferred option.
Synopsis: Gold prices in India have crossed ₹1 lakh per 10 grams for the first time, as global uncertainty pushes investors towards safer assets. Analysts say rising geopolitical tensions and fears of a global recession, fuelled by U.S. trade policies, are driving the surge.
Gold prices in India have surged past ₹1 lakh per 10 grams for the first time, amid rising global uncertainty and a shift towards safe-haven assets.
Retail rates climbed to ₹10,135 per gram on Monday, 21 April, up ₹300 from ₹9,835 the previous day, according to Goodreturns data.
Analysts say the spike mirrors a broader global trend. Dinoj Damodar, Vice President and South Zone Head for Commodities at Motilal Oswal Financial Services Limited (Motilal Oswal), cites growing geopolitical tensions, driven by the Donald Trump-led United States administration, as a major factor.
“Because of the uncertainty in the market, if the reciprocal tariffs get implemented, there can be a trade war between many nations, and that will lead to uncertainty in the overall economy,” he says.
Since the Trump administration instigated what some have described to be an erratic trade war, imposing arbitrary tariffs on imports, concerns over a global recession are mounting. The International Monetary Fund has revised its global growth forecast for 2025 down to 2.8 percent. JP Morgan now puts the likelihood at 60 percent.
In the United States, average tariffs have climbed to 30 percent, acting as a de facto $1 trillion tax on the economy. Meanwhile, tariff rates as high as 145 percent on Chinese goods have sharply reduced trade between the world’s two largest economies.
The fallout is disrupting supply chains and adding to economic instability. Increased costs for businesses, especially in manufacturing, technology and retail, have hurt corporate earnings and led investors to exit equities.
Business investment has also slowed, with many firms cutting spending or delaying expansion.
As risk appetite wanes, investors have moved into safer assets. Gold, a traditional hedge in times of crisis, has become a preferred option. Central banks and private investors alike are increasing their holdings, pushing prices higher.
Meanwhile, Subhash, a bullion trader, points to capital inflows to India as result of global uncertainty as another driver.
“The United States markets are in turmoil, and for the short term, funds are being parked in the Indian market,” he says. This, he adds, is supporting both the Sensex and gold prices.
Doubts over the long-term dominance of the United States dollar are also playing a role. As China steps up development of its digital currency, some investors are turning to gold as a safer store of value.
Despite the upward momentum in gold price, analysts remain cautious about the short-term trend.
“We are keeping a target of ₹1.5 lakh, but short term will be slightly unpredictable because it has rallied up too much. So, if this kind of rally has happened, there should be a small correction,” says Dinoj.
Jewellers on the ground report similar sentiments. “There is talk of gold going further up, but it is also a great place to encash right now. I personally would say there will be one big correction – you can re-buy it then,” says Vivek Chand, Partner at Rajarathnam’s Jewels.
India’s traditionally gold-loving middle class is now facing a dilemma: buy, hold or sell?
“There is no point in selling gold, and it is always better to keep it as long as they do not need money,” says Dinoj, highlighting gold’s reputation as a hedge against inflation.
Vivek says sentiment remains strong among investors. “People are still holding on to their gold with the expectation that it will go up much more,” he says. He adds that buyers, particularly those treating gold as an investment, continue to be active.
Subhash agrees: “Gold is the safest commodity, and people should invest in it even at this rate. If you look at the bullion market, people are aggressively investing in gold.”
(Edited by Dese Gowda)
