Gold cools off after April surge: Is the worst of the tariff war behind us? What’s next?

Gold prices have witnessed a sharp correction, dropping from ₹1,01,530 per 10 grams on 22 April to ₹96,530 by 3 May—a decline of ₹5,000 or approximately 5% in the last 10 days. This pullback follows a strong rally earlier in April and is largely attributed to profit-booking by investors, easing geopolitical concerns, and marginal strengthening of the US dollar and bond yields. While gold remains a preferred safe-haven asset, short-term corrections are common after steep gains. Many market watchers see this dip as a healthy pause rather than a reversal of the broader bullish trend.

Dr. Renisha Chainani, Head - Research at Augmont, said, "The bulls dominated the first few weeks of April, while the bears, who tested the $3200 mark in gold, dominated the final two weeks. Gold prices have corrected almost 6% from their high as the worst of the tariff war is behind us."

But despite the peak in tariff rates, uncertainty has not. Even though markets are breathing easier, investors should not assume that the situation is over. "If headline tariff rates remain unchanged, the true danger is long-term policy uncertainty. Making significant agreements during the current difficulties will not be easy. A protracted era of trade fragmentation and policy uncertainty poses a greater risk, even if we have already witnessed peak tariffs," said Chainani.

According to US President Donald Trump, there is a high likelihood that a deal will be reached with China. He also mentioned that they have "potential" trade agreements with South Korea, Japan, and India. As China announced it is evaluating a U.S. proposal to hold trade negotiations, the study was released. The nation is eager to engage in negotiations, but only if the Trump Administration lowers the 145% tax it placed on Chinese goods last month.

The Federal Reserve's monetary policy choices on May 7 may be the next significant catalyst for gold prices. Following the May 6-7 policy meeting, it is generally expected that the Fed would maintain the interest rate at a level between 4.25 and 4.5%. Market players will closely examine the policy statement's modifications and listen to Fed Chairman Jerome Powell's remarks during the press conference held after the meeting.

"The USD may gain strength and cause a leg lower in gold if the Fed suggests that the increased uncertainty around the inflation forecast brought on by trade policy would probably compel them to be patient about rate adjustments. Conversely, gold would rise if the Fed emphasised the deteriorating labour market and economic outlook more, which would support forecasts of a 25 basis point policy rate cut in June," said Chainani.

"Technically, if Gold prices sustain below $3210 (~Rs 92000) this week, they may fall towards $3140 (~Rs 90500). On the higher side, $3300(~Rs 94000) is the resistance level, which prices need to sustain, to climb higher towards $3360 (~Rs 95500)," added Chainani.