Gold Rebounds as Fed Caution Meets India’s Record Import Duty Hike

Gold markets remained volatile over the past week as investors weighed shifting macroeconomic expectations, geopolitical developments, and evolving physical demand trends. Spot gold briefly fell sharply to around US$4,453/oz midweek, pressured by cautious sentiment following the April FOMC minutes, which reinforced the Federal Reserve’s concern over sticky inflation and reduced expectations for aggressive rate cuts. Hawkish remarks from Fed Governor Christopher Waller further supported higher-for-longer interest rate expectations, strengthening bond yields and limiting upside momentum in bullion. However, gold stabilized near US$4,508/oz by the weekend before recovering toward US$4,603/oz, supported by renewed safe-haven buying and a softer US dollar.

Geopolitical factors also influenced sentiment. Ongoing peace discussions between the United States and Iran eased concerns over immediate supply-side energy disruptions, cooling oil prices and reducing broader inflation fears. This softened the US dollar late in the week, providing modest support to precious metals.

Meanwhile, India introduced one of the most significant structural developments for the physical gold market, sharply increasing gold import duty from 6% to 15%, the largest duty hike on record. While domestic gold prices have not fully reflected the increase due to weak seasonal demand, elevated recycled supply, and front-loaded imports, local markets are trading at steep discounts to official landed prices. Historical trends suggest higher duties often increase unofficial inflows and smuggling activity, though official imports generally remain resilient.

Looking ahead, Indian jewellery and bar-and-coin demand could decline by 50–60 tonnes in 2026 (~10% y/y), creating near-term headwinds. Still, ETF demand, central bank buying, and geopolitical uncertainty continue to offer medium-term structural support for gold. Silver remains supported by industrial demand despite macro pressure.