Gold Retreats Below $4,600 as India's Tariff Shock Compounds Dollar Strength and Dimming Fed Cut Hopes

Gold falls 1.43% to $4,583 despite record central bank purchases and surging bar/coin demand, hit by India's surprise import duty hike and rising US yields.

Record central bank buying and soaring demand for bars and coins have done little to shield gold from a trifecta of macro headwinds. The precious metal fell 1.43% to $4,583 an ounce on Friday, after sliding from a London Bullion Market Association fixing of $4,683 just a day earlier. That intra-week erosion of more than $100 underscores how rapidly sentiment has turned.

The most immediate catalyst came from New Delhi. India unexpectedly jacked up import duties on gold from 6% to 15%, a move designed to preserve the country's foreign-exchange reserves. The reaction was immediate: local trading ground to a halt and dealers began offering bullion at record discounts of $200 an ounce. The world's second-biggest consumer effectively slammed the door on fresh imports, choking off a vital source of physical demand.

Simultaneously, the macro picture turned hostile. The yield on ten-year US Treasuries surged nearly nine basis points to 4.54%, the highest in nearly a year, eroding the appeal of non-interest-bearing assets. The dollar index climbed to 98.82, making gold more expensive for overseas buyers. Robust US economic data — retail sales up 0.5% in April and low jobless claims — reinforced the message that the Federal Reserve is in no hurry to ease. According to CME FedWatch, 95.8% of traders now expect rates to remain unchanged in June, with only 4.2% pricing in a cut. Producer prices jumped at their fastest pace since early 2022, while consumer inflation hit its highest since May 2023.

Geopolitical uncertainty, normally a tailwind for safe havens, offered only marginal support. President Trump concluded a two-day summit in Beijing with Chinese leader Xi Jinping that covered a broad range of topics, including tensions in the Strait of Hormuz. Trump claimed the talks had solved “many problems that others could not have solved”, but no concrete agreements emerged. For gold markets, the outcome was ambiguous: the lack of a diplomatic breakthrough keeps a floor under bullion, yet the absence of fresh escalation nudged risk capital away from defensive assets.

Beneath the surface, the fundamental demand story remains strikingly strong. Global gold consumption hit a record 1,230.9 tonnes in the first quarter of 2026, with bar and coin demand surging 42% year-on-year. Central banks added a net 244 tonnes to their reserves, also a quarterly record. That robust buying explains why the price drop has so far been contained rather than disorderly.

Technically, gold now trades below its 50- and 100-day moving averages, with the relative strength index hovering near 53 — neutral with a slight bearish tilt. The zone between $4,580 and $4,600 marks the first line of support. A break below $4,637, a level highlighted by traders, could open the door to the psychologically significant $4,500 handle. On the upside, resistance sits at $4,728, a barrier that seems distant given current momentum. The next major test for the yellow metal comes with the release of US industrial production data later on Friday, which will help set the direction for the dollar and, by extension, the path of least resistance for bullion. Consolidation within the $4,580–$4,728 range is likely until the May purchasing managers’ indices arrive on May 21.