Gold Smashes ₹1 Lakh as Trump’s Tariff Storm and Fed Cut Bets Spark Frenzy

Gold prices surged to fresh highs on Thursday, August 7, as escalating trade tensions between the United States and India, coupled with growing expectations of a US Federal Reserve rate cut, triggered a wave of safe-haven buying. The rally pushed 24-karat gold past ₹1.02 lakh per 10 grams in India, while global spot prices hovered near the psychological $3,400 per ounce level.

Key Developments Driving the Rally

• US President Donald Trump imposed an additional 25% tariff on Indian imports, intensifying trade friction
• Spot gold rose 0.4% to $3,383.49 per ounce; US gold futures climbed 0.6% to $3,453.30
• In India, 24K gold hit ₹1.02 lakh per 10 grams; 22K gold stood at ₹93,810
• The dollar index weakened after disappointing US jobs data, boosting gold’s appeal
• Traders now price in a 94% chance of a 25-bps Fed rate cut in September

Global Trade Tensions: The Tariff Trigger

The rally was sparked by Trump’s August 6 executive order slapping a 25% tariff on all Indian imports, compounding earlier penalties linked to Russian oil purchases.

• The move rattled global markets and raised fears of a broader trade war
• Export-heavy Indian sectors like textiles, gems, and chemicals saw sharp declines
• Investors flocked to gold as a defensive asset amid rising geopolitical uncertainty

Rate Cut Bets and Dollar Weakness

The US dollar index dipped to a one-week low after weak labor market data:

• Initial jobless claims rose to 226,000, above expectations
• Continuing claims hit 1.974 million, the highest since November 2021
• Minneapolis Fed President Neel Kashkari hinted at the need for rate cuts to support growth

These signals reinforced expectations of monetary easing, making gold more attractive relative to interest-bearing assets.

Domestic Tailwinds: RBI’s Dovish Hold

India’s central bank added fuel to the rally by holding the repo rate steady at 5.50% and lowering its FY26 CPI inflation forecast to 3.1%.

• The RBI’s stance supports liquidity without stoking inflation
• With GDP growth steady near 6.5%, gold gains appeal as a hedge against volatility
• Aksha Kamboj of the India Bullion & Jewellers Association noted that gold remains a compelling safe-haven amid global uncertainty

Technical Outlook and Resistance Levels

Despite bullish momentum, analysts caution that the rally may face short-term exhaustion:

• Gold is approaching resistance at $3,454–$3,480 per ounce
• In India, MCX Gold October contracts hit ₹1,02,155 before settling near ₹1,01,480
• Experts suggest a near-term range of ₹98,500–₹1.02 lakh per 10 grams

Silver also joined the rally, rising 0.6% to $38.07 per ounce globally, with domestic prices touching ₹113,485 per kilogram.

Investor Strategy: Staggered Entry or Wait-and-Watch?

While gold’s fundamentals remain strong, experts advise caution:

• Consider staggered buying to manage volatility
• Watch for fresh macroeconomic signals—another central bank pivot or geopolitical escalation
• Rupee trajectory and Fed policy will be key drivers for gold’s next move

Conclusion

Gold’s breakout above ₹1 lakh is more than a headline—it’s a reflection of deepening global uncertainty and shifting investor priorities. With trade tensions escalating and central banks leaning dovish, gold may continue to shine. But for investors, timing and strategy will be everything.

Source: CNBC TV18, Business Standard, MSN Money