Gold slips by ₹1,780 from all-time high after Trump rules out tariff on yellow metal

Gold prices slipped by nearly ₹1,780 from an all-time high of ₹1,04,350 recorded last week to settle at ₹1,02,570 per 10 grams in Ahmedabad on Tuesday, after U.S. President Donald Trump ruled out tariffs on imported bars of the yellow metal. On the Multi Commodity Exchange (MCX), gold futures settled at ₹1,00,322 per 10 grams.

Gold spot prices remain steady at nearly $3,345 per ounce Tuesday after a sharp 1.6% fall in the previous session as investors await the U.S. consumer inflation report for clues on the Federal Reserve’s interest rate path.

"Monday’s drop followed President Donald Trump’s clarification that gold would not face tariffs, countering earlier reports suggesting potential duties on bullion imports. Additionally, Trump extended a 90-day tariff truce with China, announced just hours before new levies were due, easing tensions between the world’s two largest economies. Market participants are also focussed on the August 15 meeting between Trump and Russian President Vladimir Putin in Alaska, aimed at negotiating an end to the Ukraine conflict," Kotak Securities stated in its research report.

Last week, gold hit a record high of $3,534 (~ ₹104,350) following U.S. tariff confusion on Swiss gold bars, which widened the London–New York spread to $100 before narrowing to $60. "Gold surged about 3% and reached a record high of $3534 following reports of tariffs on one-kg gold bars from Switzerland. The worldwide bullion market was significantly impacted by the decision to impose taxes on gold, which resulted in halted shipments," said Renisha Chainani, head–research, Augmont.

Despite the easing of uncertainty, market fragmentation risks continue to persist. Expectations of a Fed rate cut and geopolitical developments may continue supporting prices.

Gold bars were previously believed to be part of Trump's "reciprocal tariffs" that saw a 39% duty on imports from Switzerland, a major exporter of the yellow metal. "The misunderstanding began when a Swiss gold refiner inquired about the levies and received a letter from U.S. officials explaining the situation. These tariffs will apply to both 100-ounce and one-kg gold bars, customs officials stated. However, the Trump administration later announced that it intends to exempt gold bars from tariffs, despite a recent U.S. Customs and Border Protection ruling leading to confusion," said Chainani.

Since the price difference between the London spot prices and New York futures has surged to nearly $100 per ounce, compared to typical spreads of about 30 cents on a $3,400 price, the consequences extend far beyond Switzerland.

Now that the uncertainty has been resolved, the spread has narrowed to $60. After the tariff announcement, U.S. gold futures reached an all-time high of $3,534, but spot prices largely remained subdued. "The usually cohesive global gold market could become fragmented due to the classification ambiguity, which might force market participants to source non-Swiss bars at significant premiums, while Swiss bars trade at discounts," said Chainani.

At the same time, the Fed's ongoing trade concerns and rising expectations of interest rate cuts later this year may limit overall losses. Fed Governor Michelle Bowman said on August 9 that the weaker-than-expected jobs data confirmed her concerns about the fragility of the labour market and supported her belief that three rate cuts are likely to be appropriate this year. "Markets are increasingly betting on a Fed rate cut in September amid signs of a weakening labour market, with a potential follow-up move in December also priced in,” Chainani said.

For extra clues on the Fed's policy stance, investors will be eagerly monitoring the release of key U.S. economic data later this week, including retail sales, PPI, and CPI.