Gold Rally Fades as India Joins Iran-War Central Bank Sellers

GOLD CUT an overnight rally on Tuesday, trading $35 lower for the week so far as Israel and Hezbollah continued fighting in Lebanon, defying US President Trump, while news that gold now tops central-bank reserve assets worldwide was curbed by reports of major buyer India selling the precious metal to raise cash to defend the Rupee during this Iran War crisis.

Lunchtime in London saw gold rally more than $90 per troy ounce from Monday's drop. But it then fell back to $4510, mirroring the action in oil prices yet again, as Brent crude reversed a drop from yesterday's steep rise.

Global equities touched the 4th new record in 5 sessions on the MSCI World Index before also edging back as gold prices slipped.

"Israel will not attack them, and they will not attack Israel," Trump tweeted late Monday of Iran-backed Hezbollah after what he called "very productive" calls with both sides.

But "You'd be in prison if it weren't for me. I'm saving your ass. Everybody hates you now," Trump had in fact told Israel's Prime Minister Netanyahu in a 'leaked' transcript of their conversation.

Moscow meanwhile launched 656 drones and 73 missiles at Ukraine overnight, creating "some kind of apocalypse" according to one Kyiv resident 6 days after President Zelensky asked Trump to send defensive missiles "urgently" ahead of the Kremlin's widely-expected retaliation for Ukraine striking military sites inside Russia.

"Central banks with larger gold purchases...tend to be located in higher external conflict risk regions," says a section of today's 2025 review of the International Role of the Euro from the 21-nation European Central Bank.

"The share of the Euro in global official foreign exchange reserves remained broadly stable at constant exchange rates," says the ECB. But "persistent geopolitical tensions continued to drive strong central bank demand for gold...[and its] share now surpasses both that of the Euro (15%) and US Treasuries (22%)" at end-2025 market prices.

Taking profit in gold to raise cash during economic stress however, the central banks of Russia and Turkey may have been joined by India according to new analysis from news-and-data agency Bloomberg, estimating that the Reserve Bank "likely sold gold reserves worth roughly $12 billion" in mid-May.

A fall in the RBI's total FX reserves valuation "came despite a hike in import duties on the precious metal," says Bloomberg Economics' senior India economist, Abhishek Gupta, "which should have boosted the value of the bank's bullion and dollars. This suggests the RBI was selling gold."

While the ECB in Frankfurt continues to push for the launch and widespread adoption of a "digital Euro", US lawmakers returning from recess this week are pushing to ban the Federal Reserve from ever issuing a 'Central Bank Digital Currency' through the Clarity Act whilst also pushing for Washington to build a 'reserve' of crypto-currencies led by Bitcoin, bought with the proceeds of revaluing the USA's huge gold bullion holdings.

Now selling Bitcoin to finance dividend payments for preferred Strategy shareholders, "Never sell your Bitcoin," said the 'crypto treasury' company's CEO Michael Saylor as BTC hit 10-month lows in February in a tweet viewed 5.6 million times.

BTC has since lost another 12.8% against the US Dollar.

Gold has meantime dropped 3.6% and silver 6.8%, with the more industrially-useful precious metal dropping $1 on Tuesday after rebounding to a 1-week high of $77 per troy ounce.

US President Trump last month asked China's President Xi Jinping to urge Russia's President Putin to restart peace talks with Ukraine, the South China Morning Post reports.

With Chinese naval vessels conducting "law enforcement patrols" around the island of Taiwan in "anger" at Japan-Philippines' talks over maritime borders, President Lai Ching-te in Taipei yesterday opened an AI and tech summit by saying that preserving the political status quo in the region − such as Taiwan's independence from Communist Beijing − "is key to securing supply chains" of vital chip technology.