How Trump’s Tariffs Will Impact Investment in Gold in India

By Chakrivardhan Kuppala

Gold is once again a popular safe-haven asset as trade tensions throughout the world rose, notably because of U.S. President Donald Trump's latest tariff moves. Indian investors are increasingly paying special attention to gold, not just as a commodity but also as a method to generate money, because the markets around the world are in a tizzy. Everyone wants to know how Trump's tariffs would affect gold investment trends in India.

Trump said in July that there would be a fresh wave of heavy tariffs. For instance, all goods brought in from India would be taxed at 25 per cent, while nations like Mexico, Iraq, and Algeria would have rates that were the same or higher. At the same time, certain nations, notably South Korea, the EU, Japan, and Vietnam, agreed to decrease tariffs of 10 per cent to 20 per cent. These efforts are aimed at modifying the flow of commerce, but they are affecting all markets for goods, notably gold.

Trade conflicts cause uncertainty. And when things are unclear, terror increases. In the past, investors have turned to gold in times of distress because they think it is a safe place to store their money. The most recent news is the same.

Gold prices throughout the world went up a lot in the last few days of July, getting close to $3,300 per ounce, which was just below their mid-July highs. Gold prices in India went increased roughly 2 per cent at the end of July. The price of 24-karat gold held over Rs 1 lakh for every 10 grammes, hitting a peak of Rs 1,02,330.

Why Gold Prices Rise When Countries Are at War

When commerce between countries isn't steady, currencies, stocks, and industrial goods all become less stable. Gold, on the other hand, is different since it doesn't rely on trade flows or interest revenue. When inflation or geopolitical risks are high and interest rates are low, it does well. Gold is expected to do well right now since tariffs are making prices go up, the U.S. Federal Reserve isn't lowering rates, and trade seems to be stalled.

Trump's tariffs have made products brought into the U.S. more costly. This has already led inflation to climb by 0.3 per cent in June. Even though GDP rose by 3 per cent in the second quarter, the U.S. Fed continued its aggressive posture and held interest rates at 4.25 per cent–4.50 per cent. The dollar is becoming stronger, which is making things like gold that don't pay interest less valuable. But gold is still popular because those who invest want to find a safe spot to escape from the craziness of trading.

Gold as a Two-Role Asset

In India, gold is both a cultural object and a strategy to secure assets. Because the globe is becoming more unpredictable and Trump's tariffs are going up, Indian investors are becoming more circumspect. If the rupee drops considerably further or if India puts in place retaliatory levies, it may cost more to bring gold into the country.

But instead of making people not desire gold, the rising prices have proved that it is a safe investment. The fact that gold prices went up in July suggests that Indian investors still think the metal is worth something in the long run, especially because demand is normally strongest around the vacations.

People were very interested in the domestic markets, notably MCX. At the end of July, the price of MCX gold that would expire in October was Rs 98,778 per 10 grammes. Even if stronger U.S. economic indicators were putting pressure on them, silver and other precious metals went up a bit.

How Gold Will Look Soon

Even while the overall sentiment is still positive, analysts predict there will be short-term ups and downs. Prices may drop for a short period because of the final tariff determinations that will take effect on August 1 and significant U.S. statistics like non-farm payrolls and unemployment figures that are coming out. Some individuals predict that prices will go back down to the $3,150–$3,200 per ounce level throughout the world.

But central banks and long-term investors will probably perceive any dip in price as a chance to purchase. Demand in India is likely to be high, and wedding and festival purchases will help keep it that way.

Things Indian Investors Should Keep in Mind

Tariffs that induce inflation: Higher tariffs throughout the world might make electronics, home items, and industrial goods cost more. You may defend yourself from this inflationary pressure by buying gold.

Gold is becoming a more attractive store of wealth as trade patterns alter throughout the world. When things are uncertain around the world, there are more opportunities at home. This is especially true for Indian investors who are apprehensive about the stock market or currency changing a lot.

The most important thing is to spread your money around. You shouldn't put all of it into gold, but it should be a significant component of your portfolio right now.

Conclusion

Trump's tariffs may be part of a larger plan for world politics, but they will nonetheless affect Indian homes, jewellery stores, and investment portfolios. Gold is still seen as a "crisis commodity" as global markets change. This implies that gold is more than simply a metal; it's a message: in times of uncertainty, security comes in ounces.

The author is Cofounder & Executive Director, Prime Wealth Finserv Pvt Ltd.

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)