Gold Falls Over 7% from Record High as Trade Tensions Ease
Gold prices have dipped more than 7% from their all-time high of $3,500, falling to around $3,232, amid easing geopolitical risks and stronger economic signals from the U.S.
- This marks gold’s lowest level in two weeks and the third consecutive day of declines.
- Despite the short-term correction, gold remains up by 40% year-on-year in global markets, highlighting its strong long-term trend.
Why Gold Is Losing Its Safe-Haven Edge
The recent drop in prices stems from diminished geopolitical uncertainty, particularly following President Trump’s trade announcements.
- Gold, traditionally seen as a safe-haven asset, tends to thrive in times of economic or political turmoil.
- Trump’s plans for new trade deals with India, Japan, and South Korea suggest a move away from his earlier tariff-heavy stance.
These developments have weakened gold’s appeal among cautious investors looking for protection against global disruptions.
Stronger Dollar, Weaker Gold
Another key factor pressuring gold is the strengthening U.S. dollar, which typically causes non-dollar buyers to scale back gold purchases.
- On May 1, the U.S. Dollar Index briefly crossed 100, reflecting increased confidence in U.S. assets.
- Simultaneously, Trump signed an executive order easing the 25% tariff on imported automobiles and parts, signaling a shift in trade dynamics.
Stronger currencies reduce the demand for dollar-priced commodities like gold, contributing to the current pullback.
Weak U.S. Data Could Revive Bullish Sentiment
Despite recent declines, economic data suggests that gold may still have upward potential.
- U.S. GDP contracted by 0.3% in Q1 2025, missing the forecasted 0.4% increase.
- The April ADP employment report also underperformed, with just 62,000 new jobs added against expectations of 120,000.
These numbers could push the Federal Reserve to consider rate cuts sooner, a move typically favorable for gold.
- Falling interest rates reduce the opportunity cost of holding non-yielding assets like gold.
- Market watchers now await the May 6–7 FOMC meeting, while the CPI data release on May 13 may influence the Fed’s next move.
Long-Term Outlook Remains Strong
Despite near-term volatility, the long-term trajectory for gold remains bullish, with influential voices backing sustained strength.
- Billionaire investor John Paulson has forecast gold could reach $5,000 per ounce by 2028, driven by central bank demand and trade conflict risks.
- A Reuters poll estimates 2025’s average gold price will surpass $3,000 for the first time, with a median forecast of $3,065 per troy ounce.
This is significantly above earlier estimates of $2,700, suggesting a structural shift in investor sentiment and currency diversification.
Profit Booking and Consolidation in India
In India, gold has mirrored global trends, falling over 5% from its record of ₹1 lakh per 10 grams on April 22.
- Current domestic rates stand at ₹94,710, indicating profit booking after a sharp run-up.
- Analysts attribute the dip to lack of new triggers and a round of short-term correction following substantial gains.
While the immediate trend is uncertain, the broader view remains that gold will remain resilient in 2025, supported by macroeconomic conditions and central bank buying.
