Trump’s Tariffs Announcement Sparks Gold Rush: Yellow Metal Hits New Record High, Then Sees Profit-Booking

US President Donald Trump’s tariffs announcement has rattled markets across the globe, leaving investors and traders more jittery than ever. This led to a sharp spike in demand for gold as investors sought refuge in the yellow metal. Gold prices, in both the domestic and international markets, surged to their record highs during early trade on April 3. However, soon due to profit-booking its prices reversed into the negative territory.

MCX Gold’s June futures contract surged to a new lifetime high of Rs 91,423 per 10 grams during early trade. However, it slipped Rs 1,877 from this high to trade at Rs 89,546 per 10 grams, as of 6 PM today.

In the international market, Spot Gold surged to a fresh record high of $3,167.71 an ounce before shedding initial gains to trade around $3,071 per ounce, down nearly 2 per cent from the previous close. Around the same time, Comex Gold’s April contract traded 1.7 per cent lower at 3,086.5 per ounce.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said that Gold saw an initial rally in the morning session due to the impact of Trump’s reciprocal tariffs but soon faced profit booking as prices had already largely factored in the effects of the tariffs.

Will Escalating Trade War Fears Drive Gold Further

Anindya Banerjee, senior vice president, head of research for currency, commodity and interest rates, Kotak Securities, said: “The market was expecting reciprocal tariffs, but they have been higher than expectations. As a result, metals have been hit hard, and so has crude oil. Gold initially rallied on the news but came under pressure as overall commodities sold off.”

Gold has been rallying for over a year now, yielding double-digit gains that have outpaced other asset classes like equities and bonds. Much of which built up on the fears of Trump’s tariff threats since he took power. Now that the tariffs are actually in place, initiating a potential global trade war, gold, which is traditionally seen as a hedge against financial risks, is likely to remain in high demand.

According to Banerjee, the trade war is set to escalate significantly as the "America First" policy would accelerate de-globalisation and de-dollarisation. He believes the medium-term outlook for gold is quite bullish, as it will act as a monetary anchor, though volatility is expected to remain high.

In the near term, Banerjee expects gold to enter a period of consolidation before moving higher. "We could see a broad range of Rs 88,000 to Rs 91,000 over the next few weeks, he said.

Key Cues to Keep An Eye On

Going forward, Trivedi said market participants will shift focus on the upcoming US Non-Farm Payrolls and Unemployment data, as these will give more clarity on the direction of gold prices.

The Bureau of Labor Statistics will release the Non-Farm Payrolls and Unemployment data on Friday, April 4 at 8:30 AM local time (6 PM IST).

Banerjee said, “Keep an eye on China-US trade war, China-Taiwan tensions and Israel-Iran conflict, apart from the moves of the US Fed.”