Gold fell by up to 2% to USD 4,560 per troy ounce, down from about USD 4,700 before the decline began the previous day. The move followed stronger-than-expected US producer price data for April and a shift in rate expectations.<\/p>\n
Markets are now pricing in tighter US monetary policy, including 15 basis points of US rate rises by the end of the year. A full 25-basis-point increase is priced in by March 2027.<\/p>\n
US Treasury yields also climbed, with the 10-year yield reaching a one-year high of 4.54%. This was about 20 basis points higher than the prior week, increasing the opportunity cost of holding gold.<\/p>\n
In India, the tax on gold imports rose from 6% to 15%, which is expected to reduce physical demand. India\u2019s gold imports had already dropped to a 30-year low in April after a tax rise and may fall further.<\/p>\n
Looking back to 2025, we saw the market begin pricing in rate hikes that eventually materialized, with the Fed delivering a 25-basis-point increase in early 2026. This has kept gold prices suppressed, with the metal currently trading around $4,610 per ounce. The headwinds identified last year from rising interest rate expectations remain firmly in place.<\/p>\n
The opportunity cost of holding gold is significant, with 10-year US Treasury yields now hovering at 4.65%, making government bonds a more attractive safe haven for yield-seeking investors. April’s Consumer Price Index data, released last week, came in hotter than expected at 3.6%, reinforcing the view that the Fed will not be cutting rates anytime soon. This macroeconomic backdrop suggests continued pressure on non-yielding assets like gold.<\/p>\n
The steep Indian import tax hike from last year continues to weigh on physical demand, a traditionally strong pillar of support for gold. Official import data for the first quarter of 2026 showed an 18% decline compared to the same period last year, confirming a sustained slump in consumer buying. This pattern mirrors what we saw between 2013 and 2016 when previous tax increases also heavily curtailed official demand.<\/p>\n
Given this environment, we should consider positioning for further weakness or range-bound price action in the coming weeks. Buying put options on gold futures with strike prices below the $4,500 support level offers a way to profit from a potential downward move driven by rate-hike fears. This strategy provides defined risk if the market unexpectedly rallies.<\/p>\n
For those expecting sideways movement, selling call options with strike prices above the recent resistance level of $4,750 could be a viable strategy to generate income from premiums. The persistent strength of the US dollar, which just hit a six-month high against a basket of currencies, further caps gold’s upside potential. This makes selling out-of-the-money calls an attractive proposition.<\/p>\n
However, we must remain aware of geopolitical tensions in the South China Sea, which could trigger a flight to safety and a sudden spike in gold prices. A small allocation to long-dated, out-of-the-money call options could serve as a low-cost hedge against such an unforeseen event. This provides protection for an otherwise bearish or neutral portfolio.<\/p>\n","protected":false},"excerpt":{"rendered":"
Gold drops 2% as US inflation data boosts rate-hike bets; higher Indian import tax dampens demand.<\/p>\n","protected":false},"author":87,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71],"tags":[],"class_list":["post-46845","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t