Gold Sheds Nearly 4% in a Week as US Inflation and India Tariff Deliver Twin Blow

Gold slides 17% from peak as US inflation spikes, Fed hints at rate hikes, India boosts import duty. Macro pressures dominate, but gold demand remains robust.

The yellow metal’s retreat from its January record accelerated sharply last week, with spot gold closing at $4,543.60 an ounce on Friday — a weekly drop of 3.75% that leaves it 17% below the peak of $5,450 hit at the start of the year. What began as a consolidation has turned into a full-blown correction, driven by a confluence of macro pressures that show no sign of easing.

At the heart of the sell-off are red-hot US inflation readings. The consumer price index jumped to 3.8% in April, its biggest year-over-year increase since 2023, while the producer price index surged 6.0% — the sharpest rise in four years and a level last seen in 2022. The data torpedoed hopes that the Federal Reserve might soon pivot to rate cuts. Instead, the CME FedWatch Tool now assigns a nearly 50% probability of at least a 25-basis-point rate hike by the end of 2026, up from roughly 20% just weeks earlier. Fed Chairman Kevin Warsh reinforced that hawkish tilt, signaling that elevated borrowing costs will persist.

The ripple effects were immediate. The yield on 10-year US Treasuries climbed above 4.5% and briefly touched 4.6%, the highest in a year. That sharp rise makes non-yielding gold less attractive, while the dollar strengthened to its best level since early April, further pressuring the dollar-denominated metal. Bank of America Global Research responded by pushing back its rate-cut forecast entirely: it now expects no cuts in 2026, with two quarter-point reductions penciled in for July and September 2027.

Compounding the macro headwinds, India surprised markets by jacking up gold import duties from 6% to 15%. As one of the world’s largest bullion consumers, the move instantly triggered record discounts in local trading. China’s steady demand, which has provided a floor for prices in recent months, cannot fully compensate for India’s sudden retreat from the market.

Geopolitical tensions, normally a tailwind for gold, have so far failed to provide support. The near-complete closure of the Strait of Hormuz continues to disrupt energy shipments and feed inflation through higher oil prices. A recent summit between Donald Trump and Xi Jinping yielded no breakthrough, leaving the blockade in place and the risk premium intact.

Despite the price slide, the underlying demand picture remains robust. Global gold demand hit a record $193 billion in the first quarter of 2026, totaling 1,231 tonnes — a 74% surge year-on-year. Bar and coin purchases reached 474 tonnes, among the highest on record, and central banks added 244 tonnes to their reserves. Mine output and recycling are barely growing, and investors continue to build positions in gold ETCs. Analysts describe the current weakness as macro-driven rather than a structural trend reversal: gold is still up about 4.7% year-to-date.

The week of May 19–23 presents two key tests for the metal. On Wednesday, the Fed will release the minutes from its April meeting; any further hints of tightening could extend the selling. On Thursday, S&P Global publishes preliminary May purchasing managers’ indices. If the data shows sustained input price pressures, the dollar is likely to stay strong, keeping gold under pressure. Chart watchers have their eyes on the $4,500 level as the next critical support.