Gold trades above Rs 91,000 as Trump rolls out new reciprocal tariffs — what should investors do?

Fine Gold (999) was trading at Rs 90,920 per 10 gm level in morning trade on April 2.

Gold prices were trading above the Rs 91,000 level as US President Donald Trump announced reciprocal tariffs, which has sparked concerns of a rise in prices and retaliatory measures from America’s partners, escalating global trade war.

The move is aimed at boosting US manufacturing and overhauling a global trade system which Trump has slammed as unfair.

On April 3, fine gold (999) was trading at Rs 91,010 for 10 gm in the morning trade, India Bullion and Jewellers Association Ltd (IBJA) data said.

In the international markets, gold settled on a positive note on April 2. Gold June futures contract settled at $3,166.20 per troy ounce, up by 0.64 percent.

Also read | Gold price surges come and go, stick to a 10-15% allocation

Gold showed very high price volatility in the international markets after the US President announced reciprocal tariffs on US trade partnering countries. The dollar index and the US 10-year bond yields slipped to five-and-a-half month lows.

"After US reciprocal tariff announcements, global markets remain highly volatile as partnering countries will retaliate or go for trade deal with the United States. It’s time to be cautious on markets and trade with limited quantities. We expect gold and silver prices to remain volatile this week amid volatility in the dollar index and the global trade war," said Manoj Jain, director of Prithvi Finmart.

Factors working in favour

The accumulation of gold reserves by central banks across the globe, inflation concerns, and rising demand after the pandemic aided the surge in prices.

According to Chirag Mehta, Chief Investment Officer, Quantum Mutual Fund, gold's ascent in 2025 has been nothing short of impressive, reaching nine new record highs year-to-date despite occasional price volatility.

“Since the onset of his campaign, President Trump has consistently promoted the ‘America First’ policy, with imposing tariffs on foreign nations being a central aspect of his economic agenda,” said Mehta. “These persistent trade tensions heightened concerns about a potential economic slowdown, prompting investors to flock towards assets like gold.”

While gold has not been a direct target of tariffs, market reactions to trade uncertainty have driven a significant shift in trading behaviour and impacted the gold price.

Also read | Will high gold prices dampen the festive spirit of buyers?

Outlook for gold

In 2024, gold delivered over 20 percent returns compared to Nifty’s 8.7 percent, further boosting investor interest in the yellow metal.

Early signs of cooling inflation in the US and India have made the way for further rate cuts in 2025.

“When there is an expectation that the interest rate can decrease, people will tend to move towards gold to grab higher returns. It is expected that the gold rally will continue in 2025 until and unless there is a sign of cooling down of broader market volatility,” said Ajay Garg, chief executive officer, SMC Global Securities.

A combination of economic slowdown and job market troubles in the US is whipping up fears of stagflation, which could lead to long-term inflation.

What should investors do?

According to Mehta, in the long term, the policies implemented by central banks are likely to have a profound impact on the gold market.

"Gold and silver prices are trading slightly higher today (April 2) on the international bourses. We expect precious metals prices on Indian bourses to trade range-bound to slightly higher for the day, as the market took a break from a record-setting run ahead of US President Donald Trump’s implementation of sweeping “reciprocal” tariffs, which are expected to take effect later Wednesday," Nirmal Bang Securities said in a note.

Also read | Why gold shines as a hedge against stock market volatility

As inflation and market volatility challenge global economies, gold offers stability and a hedge, making it an ideal option for long-term wealth preservation.

Gold acts as a hedge and one may have around 5-10 percent allocation to it. However, gold is volatile too. There are known long periods in history when gold hasn't moved. Experts also warn against going extra bullish on gold at higher levels.