New Delhi: 

As world markets crumbled on Monday following US President Donald Trump's tariff hikes and China's retaliation, the impact was also visible on gold prices, which have fallen by more than 3 percent from their peak.

On Monday, gold dropped to below the Rs 88,000 mark but quickly recovered. At around 3 PM, it was trading around Rs 88,250 per 10 grams on the MCX. While some experts fear a further decline, many others are still bullish about gold's safe-haven appeal.

Talking to ETV Bharat, Anuj Gupta, Head of Currency and Commodities at HDFC Securities, said that in the short term, there may be some downside for gold prices, but in the longer run, the prospects remain upward.

Tariff impact on Gold jewellery and diamonds

According to a report prepared by the Global Trade Research Initiative, India exported $11.9 billion worth of gold jewellery and cut and polished diamonds to the United States in 2024, with the US accounting for 40 percent of India’s global exports in this category.

While the average US Most Favoured Nation (MFN) tariff on these goods was previously 2.1 percent, Indian exports will now face a steep 30.2 percent tariff. India is the second-largest supplier of these products to the U.S., following Switzerland and ahead of Canada, holding a 13.63 percent share of the market.

Report suggest that a large portion of diamond exports are made on a consignment basis, meaning unsold goods are returned to India—lowering the country’s net export value. India may lose the market in larger stones. Some processing may shift to Belgium or Thailand. Price-sensitive mechanical jewellery may shift to Europe; premium handcrafted products may hold. Given India’s relatively low-value addition in this sector and the heavy new tariffs, exports are projected to fall by 15.3 percent, or roughly $1.82 billion.

According to Manav Modi, Senior Analyst, Commodity Research at Motilal Oswal Financial Services Ltd, after a blanket tariff announcement by Trump, all markets languished, however, more than 50 nations have reached out to the White House to begin trade talks since the US President rolled out sweeping new tariffs.

China struck back at the US tariffs imposed by Trump with a slew of counter-measures including extra levies of 34% on all US goods and export curbs on some rare-earths, deepening the trade war between the world's two biggest economies.

"Focus this week will be on RBI interest rate decision and US CPI and PPI data," he added.

According to him, the pressure on the dollar makes the rupee a bit stronger, which is contributing to the decline in gold prices. However, as the US builds up its military presence in the Middle East amid fears of war with Iran, it is once again giving gold its safe-haven appeal.

While a retired Professor of Economics at Jawaharlal Nehru University and an expert in economic matters, Arun Kumar said that safe-haven appeal for gold should continue. Though Kumar did not give any level, he said any fall in gold's prices may be temporary and in the longer run, it may go up further.

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