Following the escalation of US-China trade war tensions and a weakening US dollar as a result of Donald Trump's unexpected tariff policy shift, gold prices rose to a new high in domestic and international markets.After hitting a new high of 93,940 per 10 gm on Friday, MCX gold prices settled at 93,887 per 10 gm. At ₹93,887 per 10 gm, the MCX gold rate closed the week up ₹5,757, or 6.53%, from the previous Friday's close of ₹88,130. Spot gold prices closed at $3,236.21 per ounce, a 6.41% weekly gain, after hitting a new high of $3,245 per ounce on the global market.
The US dollar index dropped below 100 for the first time in two years last week as a result of strong selling pressure on US dollar rates. It ended Friday at 99.89, down 0.72%.
Market analysts say that a weakening US dollar due to unforeseen policy changes and increased US-China trade tensions were the main drivers of last week's gold price rally. Unexpected changes in US policy, such as the lifting of tariffs on the majority of trading partners except China, caused a sharp decline in the US Dollar Index, which gave gold a powerful tailwind. They asserted that tensions in the US-China trade war have increased as a result of Donald Trump's sudden decision to halt tariffs on all trading partners save China, which has bolstered the gold price increase. According to analysts, the price of spot gold has decisively broken through the $3,200 resistance level, and the valuable yellow metal could soon hit $3,280 or $3,320. MCX gold prices are expected to reach ₹95,000 to ₹95,500 per 10 gm in the domestic market.
Triggers of Gold Price Rally
"This steep rally over the last four trading sessions was driven primarily by escalating US-China trade tensions and a weakening US dollar following unexpected policy shifts," said Sugandha Sachdeva, Founder of SS WealthStreet, in response to questions about the causes of the gold price rally. Gold was negatively impacted by the extensive market disruption caused by US President Donald Trump's imposition of high tariffs. However, the US Dollar Index saw a sharp decline due to unforeseen policy changes by the US, such as the lifting of tariffs on the majority of trading partners except China. She said the US Dollar Index's drop below the critical 100 mark to a multi-year low (around 99.01) provided a strong tailwind for gold.
Expecting a further increase in gold prices, Jateen Trivedi, VP of Research—Commodity & Currency at LKP Securities, stated, "Gold extended its record-breaking rally defying rupee strength as geopolitical tensions and tariff battles between the US and China escalated further. The reciprocal tariff actions have created new uncertainty in global trade flows, prompting increased hedge positions in safe-haven assets such as gold. Despite domestic currency appreciation, strong global cues and rising economic concerns have kept sentiment strongly bullish for bullion."
