Gold is absorbing blows from two directions that are usually at odds. India’s surprise decision to double import duties on the metal in May has choked off legal demand and turbocharged the black market, while a sudden ceasefire between Israel and Iran has stripped away the geopolitical risk premium that propped up prices for weeks. Add an unexpectedly hawkish turn from the Federal Reserve, and the yellow metal is facing its steepest monthly slide in years.
India’s duty hike to 15% was intended to curb the nation’s gold hunger, rein in its trade deficit and support the rupee. Instead, it has handed a windfall to smugglers, who bypass the full 18.45% tax-and-duty burden and offer discounts of more than $200 per ounce on the gray market. Official importers cannot compete. Banks and refineries have slashed purchases, and the semi-pure gold segment that once gave Indian processors a tax edge has lost its advantage. Illegal inflows could climb back above 100 tonnes by 2026, costing the government an estimated $2.65 billion in lost tax revenue. The world’s second-largest jewelry market is now the epicenter of a growing shadow trade.
That local crackdown comes as the global safe-haven narrative dissipates. The formal end to reciprocal strikes between Israel and Iran has restored some normalcy in the region — flights are resuming in Tehran, schools are reopening in Israel — and the immediate crisis premium has evaporated. Brent crude has eased to $91.70 a barrel, and gold has given up much of its war-driven gains. The spot price last traded at $4,353.60, down roughly 8% on the month, after touching a low of $4,303.90 on Tuesday — a drop of 1.14% in a single session.
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Central banks are still adding to their vaults on a structural basis, buying a net 19 tonnes in April alone, with Poland and China leading. Those purchases are immune to local tax changes and geopolitical headlines. But they are being overwhelmed by a far more potent force: the interest rate calculus in the United States. Kevin Warsh took the helm of the Fed at the end of May, inheriting a economy that shows no signs of cooling inflation. Goldman Sachs has scrapped its 2026 rate cut forecasts entirely, now penciling the first 25-basis-point reduction for June 2027 and a second for December 2027. The CME FedWatch Tool assigns a better-than-70% probability of a rate hike by December 2026. For a non-yielding asset, that is a powerful headwind.
Technically, the chart has soured. Gold is trading roughly 7% below its 50-day moving average, with a relative strength index of 31.9, flirting with oversold territory. The 50-day line itself previously sat near $4,632, a level that now marks psychological resistance. Analysts point to the next major floor at $4,000, and with a 52-week trough of $3,901 still on the radar, a retest cannot be ruled out if Wednesday’s US inflation data for May comes in hot.
Yet the market remains deeply polarized. Institutional demand from central banks in China and India shows no sign of abating, providing a long-term bid even as short-term speculative interest evaporates. For now, gold is caught between a structural floor built by sovereign buyers and a cyclical ceiling reinforced by rising real yields, a stronger dollar, and fading geopolitical fear. The next price move hinges on whether the macro headwinds prove strong enough to overwhelm the steady accumulation from the world’s monetary authorities.
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