Gold Prices Rebound After US-India Deal: Key Implications for Investors and Traders
Gold and Asian stock markets rebounded on Tuesday following a period of extreme volatility in metals markets. Investor sentiment improved after a deal was reached to reduce U.S. tariffs on Indian goods. Additionally, the Australian dollar gained strength after an interest rate hike.
India’s rupee and stock market responded positively to U.S. President Donald Trump’s announcement that tariffs on Indian imports would be reduced from 50% to 18%. This tariff cut comes in exchange for India agreeing to halt Russian oil purchases and ease trade barriers.
In the Asian markets, gold prices rose by 3% to $4,820 an ounce, marking a recovery of about 9% from Monday’s lows. Silver also traded higher, gaining 5% to reach $83.34 an ounce.
The sharp fluctuations in gold, silver, stocks, and the U.S. dollar were triggered by Trump’s nomination of Kevin Warsh to lead the Federal Reserve, which raised concerns about a potential reduction in the Fed’s balance sheet and higher bond yields—factors negatively affecting precious metals, which do not generate income.
The steep price drops on Friday and Monday, however, went beyond fundamental causes. These declines were largely driven by the unwinding of leveraged positions, triggering widespread asset sell-offs as traders liquidated other holdings to cover losses, causing tremors across global commodity and stock markets.
### Gold Prices in Oman
– 24k: RO61.100
– 22k: RO57.050
– 18k: RO45.100
According to Nigel Green, CEO of the deVere Group, the recent dramatic fall in gold prices displays the characteristics of a “leverage-driven break” rather than a collapse in underlying demand. Gold has experienced its sharpest decline in over a decade, dropping nearly 20% from its recent peak above $5,500 an ounce. Silver faced even steeper losses, including intraday drops nearing 12%, marking some of the most severe short-term declines ever recorded.
Green explains that gold’s rapid rise to record levels created vulnerability because much of the market was held through borrowed money and leveraged financial instruments such as futures, options, and leveraged ETFs. These positions function smoothly only while prices rise or remain stable, but once prices start falling, the mechanics become adverse.
The initial phase of the downturn involved forced selling due to rising margin requirements amid heightened volatility. Traders had to either post additional cash immediately or close positions, leading many to sell. This selling pressure drove prices lower regardless of market fundamentals.
This forced liquidation explains the speed and severity of the decline. Long-term holders did not suddenly lose confidence; rather, leveraged investors were compelled to exit. This phase is typically self-limiting.
Once the leverage is eliminated, selling pressure diminishes, daily price fluctuations narrow, and market liquidity improves. Prices stabilize not because of an immediate improvement in sentiment but because mechanical selling pressure subsides.
Green outlines several reasons why gold prices should stabilize:
– Lower prices tend to attract genuine buyers, particularly physical demand from Asia, which historically increases after sharp pullbacks.
– Central banks, operating with long-term perspectives, rarely chase price rallies but tend to add reserves during periods of weakness.
– Hedging demand resumes once prices stop falling sharply. Institutions that paused investments during extreme volatility typically resume allocations once price movements become more orderly.
A recovery phase usually follows a leverage washout. Gold prices tend to rebound because the fundamental reasons for holding gold remain intact, including high debt levels, fiscal pressures, currency competition, and policy constraints. The recent price reset changes positioning, not the macroeconomic backdrop.
Early recovery gains are often uneven and low in volume, reflecting market repositioning rather than renewed enthusiasm. Gold generally builds a base with sideways trading before momentum returns and confidence strengthens.
In summary, Nigel Green states: “Gold’s recent plunge follows a familiar pattern: excessive leverage created fragility, volatility triggered margin calls, forced selling drove prices down, and now positioning is being reset. Once leverage clears, prices stabilize. While the recovery may not be immediate or dramatic, the mechanics favor a bounce rather than a continued freefall after the forced selling phase ends.”
This outlook suggests cautious optimism for gold’s near-term price trajectory following the recent turbulent market activity.
Special Analysis by Omanet | Navigate Oman’s Market
The recent sharp volatility in gold prices, driven primarily by leveraged selling rather than fundamental shifts, presents a strategic buying opportunity for businesses and investors in Oman. Smart players should monitor the deleveraging phase, as gold is likely to stabilize and gradually rebound once forced selling subsides, offering a potential entry point for portfolio diversification or investment in gold-related ventures. Long-term investors should consider the persistent macroeconomic factors supporting gold demand, such as fiscal pressures and currency competition, which remain intact despite short-term price fluctuations.
