Gold prices in India fell on Tuesday. The price per gram dropped to 12,277.96 Indian Rupees (INR) from 12,317.33 INR the day before. In tola terms, the price decreased from 143,662.20 INR to 143,207.70 INR. Several factors led to this decline, including a slight rise in the US Dollar and a decrease in US-China trade tensions. These factors typically lower gold prices. Investors are also anticipating a 25-basis-point rate cut by the US Federal Reserve, which may prevent a significant drop in gold prices.

Geopolitical Tensions Impact

The ongoing US government shutdown and geopolitical issues, particularly involving Russia and Ukraine, continue to support gold as a safe-haven asset. Traders are waiting for US consumer inflation data, which could influence future price trends. Central banks are major buyers of gold, with countries like China and India boosting their reserves. Gold prices tend to rise when the US Dollar and riskier assets fall, displaying an inverse relationship. Local prices are adjusted based on international rates but may vary due to local conditions. These values reflect market sentiment toward gold. Gold prices are dipping today, mainly due to the strengthening US Dollar. The Dollar Index (DXY) is around 107 as the market expects the Federal Reserve to maintain its strict stance on interest rates, making gold—a non-yielding asset—more expensive for investors. This situation differs from late 2023 when markets anticipated multiple Fed rate cuts. While those cuts happened in 2024, they were quickly followed by rate hikes to fight rising inflation. This history is making traders hesitant to bet against the Dollar, limiting any significant rally in gold prices for now.

Central Bank Demand and Market Strategy

Geopolitical risks continue to support gold prices, preventing a major sell-off. Ongoing tensions at the Russia-Ukraine border serve as a reminder of gold’s safe-haven status. Similar to events leading up to 2024, any escalation in this area could lead to a rush for safety, pushing gold prices higher. We must also acknowledge the steady demand from central banks, which plays a crucial role in the gold market. In 2022, they purchased a record 1,136 tonnes, and reports from the World Gold Council show that this trend continued into 2024 and the first half of 2025. This long-term buying from large institutions offers strong support for the market. Unlike between 2018 and 2020, when gold prices fluctuated greatly due to US-China trade news, the market focus has shifted. While global trade still matters, immediate risks now relate more to sovereign debt issues and regional conflicts. Nevertheless, a shaky global economy generally bodes well for gold. With a strong dollar pressuring prices and geopolitical support in place, we expect more volatility in the coming weeks. For derivative traders, this environment is ideal for strategies like straddles or strangles, which can profit from significant price changes in either direction. The upcoming US inflation data and the next FOMC meeting will be crucial in determining gold’s future direction. Create your live VT Markets account and start trading now.

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