Gold Prices Surge Amid Trade War Fears and Central Bank Buying

Gold prices in India surged on February 13, tracking global trends and rising domestic demand. On the Multi Commodity Exchange (MCX), gold futures for April contracts opened at ₹85,700 per 10 grams, gaining further to ₹85,850 within the first 10 minutes of trade. The yellow metal had earlier hit an all-time high of ₹86,360 per 10 grams on February 11. The rally is largely driven by geopolitical uncertainty, strong central bank buying, and weak stock market sentiment.

In the international market, gold prices also rose due to increased safe-haven demand amid uncertainty surrounding U.S. President Donald Trump’s aggressive trade policies. Experts suggest that global macroeconomic instability and fears of an impending trade war have contributed to the spike in gold prices.

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Key Reasons Behind Rising Gold Prices

1. Trade War Concerns

Gold is traditionally viewed as a safe-haven asset during periods of economic and geopolitical uncertainty. President Trump’s tariff policies have heightened fears of a global trade war, leading to increased gold buying. The U.S. administration has imposed fresh duties on steel and aluminum imports, sparking concerns over retaliatory measures from major economies such as the European Union, China, Canada, and Mexico.

These trade tensions have led to market volatility and economic uncertainty, making gold a preferred investment avenue. With global stock markets fluctuating, investors are flocking to gold as a hedge against potential economic downturns.

2. Central Bank Buying

Central banks around the world have been accumulating gold at an unprecedented pace. According to Bloomberg, China’s central bank increased its gold reserves for the third consecutive month in January. Similarly, the Reserve Bank of India (RBI) significantly boosted its gold holdings, adding 72.6 tonnes in 2024.

The World Gold Council (WGC) reported that central banks collectively bought over 1,000 tonnes of gold in 2024, marking the third consecutive year of heavy gold purchases. With ongoing economic uncertainty and inflation concerns, central banks and exchange-traded fund (ETF) investors are expected to continue driving demand for the precious metal.

3. Inflation and Weak Stock Market Sentiment

Rising inflation concerns have further fueled gold’s appeal. Gold is often considered a hedge against inflation, as it tends to retain its value when currency depreciation erodes purchasing power. In addition, weak stock market performance has pushed investors toward safe-haven assets like gold.

The domestic stock market has been volatile in recent weeks, with the Sensex and Nifty facing multiple sessions of decline due to foreign institutional investor (FII) outflows and disappointing corporate earnings. This has contributed to the rising demand for gold in India.

Conclusion

Gold prices have surged nearly 12% in just six weeks since the beginning of 2025. The combination of trade war concerns, central bank accumulation, inflation fears, and stock market instability has positioned gold as a strong investment option. Experts believe that as long as geopolitical risks persist, gold will remain in demand. Investors looking for a hedge against uncertainty may continue to add gold to their portfolios, keeping prices elevated in the near term. However, traders are advised to monitor global economic indicators and central bank actions closely before making investment decisions.