India's Gold Tariff Shock Coupled with Sticky US Inflation Sends Bullion Lower
Published on 05/19/2026 at 04:42 | Redaktion boerse-global.de
Gold has stumbled into the week, caught between a hawkish pivot in US rate expectations and an abrupt demand-side shock from the world's second-biggest consumer. The safe-haven trade that normally accompanies fresh geopolitical turmoil has been all but sidelined, with investors instead fixated on rising yields and a dollar that keeps gaining ground.
The spot price ended Monday at $4,571 an ounce, but the tone was set earlier in the session when bullion dipped to $4,553. Over the past seven days the metal has shed 3.21%, and the decline over 30 days stands at 5.58%. That leaves it trading 3.07% below its 50-day moving average of $4,715.86, while the relative strength index sits at a neutral 49.8.
India Triples Import Duties
New Delhi dealt a heavy blow to physical demand over the weekend by raising import tariffs on gold and silver from 6% to 15%. The move follows a public appeal from Prime Minister Narendra Modi for citizens to curb their gold purchases for a full year, part of a broader effort to conserve foreign-exchange reserves as rising energy costs squeeze the trade balance.
The timing is especially punishing. India’s monthly gold imports averaged 83 tonnes in the first few months of the year, and the value of the country’s gold demand hit roughly $25 billion in the opening quarter. Local jewellers now face a steep cost increase, even if the global impact may be tempered by the fact that the price is being driven primarily by macroeconomic forces elsewhere.
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US Yields and the Fed Override Mideast Risks
The real drag on gold remains the interplay between US inflation and interest rates. April’s consumer-price index came in at 3.8%, the highest reading since May 2023, effectively killing off any lingering hope for a near-term rate cut. The probability of a Federal Reserve reduction at the June meeting has collapsed from around 48% to below 8%, and the futures market now assigns a roughly 50% chance of a rate hike by December. Even a cut in 2026 is widely viewed as unlikely.
The benchmark 10-year Treasury yield has climbed to roughly 4.63%, the highest level since January 2025, while the dollar continues to strengthen. For a non-yielding asset like gold, higher real yields and a firmer dollar create a punishing combination. The CME Group’s FedWatch tool shows 97.4% of market participants expect no change at the next Federal Open Market Committee meeting, and only 2.6% see a cut.
Geopolitical tensions in the Middle East should ordinarily provide a floor under gold. US President Donald Trump has escalated pressure on Tehran, and attacks on energy infrastructure in the Persian Gulf have disrupted oil flows. But the supply-driven spike in energy prices is actually compounding the inflation problem. Since February 27, Brent crude has surged 37%, while gold has lost 10% over the same period. As Amy Gower of Morgan Stanley points out, an energy supply shock does little to boost hopes for lower US interest rates.
The FOMC Minutes as a Catalyst
All eyes now turn to the release of the FOMC meeting minutes on May 20. That meeting, the last chaired by Jerome Powell, kept the fed funds target range at 3.50% to 3.75%. Kevin Warsh has since taken the helm, and four members dissented at the previous gathering, signalling real divisions within the committee. A clearly hawkish tone would prolong the pressure on gold, while softer language could arrest the current correction ahead of the May PMI data and the University of Michigan inflation expectations survey.
Central Banks Keep the Long-Term Picture Alive
Despite the near-term headwinds, the fundamental demand story remains intact. According to the World Gold Council, total gold demand including OTC reached an estimated 1,231 tonnes in the first quarter of 2026, a 2% increase year-on-year. In dollar terms, demand totalled $193 billion. Central banks were net buyers of an estimated 244 tonnes, with Poland’s National Bank alone adding 31 tonnes to its reserves.
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Retail investors also stepped in, with demand for coins and bars jumping 42% to 474 tonnes. Major banks are therefore sticking to their bullish long-term forecasts, with year-end price targets ranging from $5,400 to $6,300 an ounce. The rationale hinges on sustained central-bank buying and the eventual expectation that the Fed will begin easing once inflation moderates.
For now, however, gold is caught in a perfect storm of higher US yields, a soaring dollar, and a sudden demand shock from India. The next few sessions, with the Fed minutes and the PMI releases, will determine whether the correction deepens or finds a tentative floor.
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