Key Triggers for the 2026 Gold Price Surge
The sharp rise in gold prices in India on February 4, 2026, was largely driven by a “triple threat” linked to political and geopolitical uncertainty under the Trump administration. This included intensifying trade war concerns, particularly around Greenland, growing tensions with Iran, and the impact of a partial shutdown of the U.S. government.
Gold’s response to US tariff announcements
The U.S. administration’s tariff measures announced in April 2025 significantly influenced gold prices. Concerns over the possible economic consequences of these tariffs prompted investors to seek refuge in gold as a safe-haven asset. Heightened uncertainty drove stronger demand, lifting gold prices. Reuters reported that prices rose as a weaker dollar and ongoing tariff tensions supported buying interest. Expectations of further economic disruption kept market sentiment cautious, sustaining demand for gold and keeping prices at elevated levels.
- Tariff Reduction Rebound: U.S. President Donald Trump reduced reciprocal tariffs on Indian imports from an initial threat of 50% down to 18%. While trade normalization typically reduces "safe-haven" demand, the clarity provided by the deal, combined with a weaker U.S. dollar, triggered a sharp recovery of over ₹6,600 per 10 grams in a single session.
- Currency Impact: The trade deal led to the Indian Rupee's strongest single-day rise in over three years, jumping to 90.27 against the dollar. This strengthening of the rupee initially capped some domestic gains, but the global surge in spot gold (near $5,000/oz) ultimately pulled domestic prices higher.
- Government Import Price Adjustment: Concurrent with the trade deal, the Indian government slashed the base import price of gold by $50 to $1,518 per 10 grams, easing the duty burden on imports even as global prices hover near records.
How are gold prices rebounding?
Despite the recent pullback, experts have pointed out that gold has corrected from record-high levels and continues to trade at elevated prices. They added that the undertone for gold still remains bullish owing to heavy safe-haven demand.
Gold prices remain in focus, with global cues and optimism over the trade deal driving momentum in the yellow metal.
Impact of China’s gold strategy and demand
The India-U.S. trade deal finalized on 2 February 2026 has significantly weakened China's competitive position and triggered a strategic shift in its gold market. While the deal reduced U.S. tariffs on Indian goods from 25% to 18% (and as high as 50% in some sectors), China remains burdened by an effective tariff rate of 47.5%, with more than 70% of its tariff lines attracting duties as high as 55%.
- Accelerated Investment Demand: As China faces a significant disadvantage compared to India (which now holds at least a 50% tariff advantage over Beijing), Chinese investors have pivoted heavily toward gold as a hedge against economic isolation. Gold investment in China rose 28% in the lead-up to 2026, and early February data shows local gold ETFs seeing larger inflows than those in the U.S..
- "De-dollarisation" and Central Bank Buying: The U.S. use of tariffs as a "political weapon" has reinforced the People's Bank of China's (PBoC) strategy to diversify away from U.S. dollar assets. Analysts expect China to lead a global central bank push to buy at least 800 tons of gold in 2026 to protect against currency weaponisation.
- Shanghai Gold Exchange (SGE) Premium: Chinese markets are currently trading gold at a notable premium over the London Bullion Market Association (LBMA), indicating intense local demand and supply tightness as the "Spring Festival" restocking coincides with new tariff pressures.
- Jewellery Sector Strain: Unlike India, where the government slashed base import prices by $50 to $1,518 per 10g to ease the duty burden, China implemented a VAT change on November 1, 2025, that reduced deductible tax for jewellery makers from 13% to 6%. This, combined with high global prices, has caused Chinese jewellery consumption to drop by 25%.
Comparative Tariff Landscape Impact on Gold (February 2026)
The global tariff environment in February 2026 continued to influence investor sentiment across commodity markets, with gold remaining a key barometer of risk perception. Shifts in trade policies and tariff dynamics shaped demand patterns, reinforcing gold’s role as a hedge against economic and geopolitical uncertainty.
Country
|
New U.S. Tariff Rate
|
Strategic Impact on Gold
|
India
|
18%
|
Prices stabilised; government reduced import base prices to support demand.
|
China
|
47.5% - 55%
|
High "fear-driven" buying; massive rotation into investment-grade gold.
|
Vietnam
|
20%
|
Emerging as a regional competitor, but lacks India's new "tariff edge".
|
Conclusion
Overall, the comparative tariff landscape in February 2026 highlighted how closely gold prices remain tied to trade-related uncertainty. As tariff signals evolved across major economies, investor behaviour reflected a continued preference for safety over risk. Gold’s resilience underscored its role as a stabilising asset during periods of policy-driven volatility, while also signalling broader concerns around global growth, currency movements, and cross-border trade stability.
