Gold prices faced a decline of over 1% on Monday, dipping below $3,000. However, the precious metal has since recovered slightly, trading around $3,026, down by 0.37% from Friday’s close. Despite this drop, gold has surged by 28% over the past year, with the current price in India at Rs 90,380.
The initial dip in gold prices could be attributed to investors liquidating positions to secure profits and cover losses amid the broader market downturn, which has been largely driven by concerns over a potential global trade war. Gold had touched a record high of $3,167.84 last week, driven by safe-haven inflows following President Trump’s announcement of aggressive new tariffs.
Global stock markets are feeling the strain, with equities slumping for the third consecutive day on Monday. Nasdaq futures dropped more than 5%, the Dow fell over 1,300 points, and the Nikkei saw a significant 8% drop at the open. The ongoing market decline is a result of the White House’s firm stance on tariffs, escalating concerns over a potential U.S. recession.
Federal Reserve Chairman Jerome Powell’s recent remarks about the impact of tariffs—higher inflation and slower economic growth—have further spooked markets. However, despite these challenges, gold remains supported by the potential for continued demand. Mohamed El-Erian, chief economic advisor at Allianz, raised the likelihood of a U.S. recession to 50% due to the combination of aggressive trade policies and weak GDP growth.
Inflation concerns, particularly with the rise in the core PCE, could offer additional support to gold if the Fed maintains its restrictive stance, potentially pushing prices higher as growth slows and yields decline. This week’s CPI and Fed minutes will be key to assessing whether inflation concerns will drive gold’s bullish trend.
Silver, meanwhile, has shown signs of recovery after a sharp drop last week. On Monday, silver traded around $30, up 1.6%, and has gained 7% over the past 12 months. Despite the recent dip below $30 per ounce, which was the lowest level since January, silver remains volatile, with concerns about global demand and recession risks continuing to influence its price movements.
Both gold and silver are expected to remain volatile as traders continue to react to broader market shifts, selling during any price upticks to offset losses in other areas.
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