The escalation of the India Pakistan conflict: behind Trump’s “mediation” lies the arms business, and the gold market is experiencing a roller coaster ride

On the early morning of May 7th Beijing time, India launched cross-border air strikes against Pakistan, claiming retaliation for the Kashmir terrorist attack. Pakistan immediately shot down 5 Indian military aircraft (including 3 Rafale), resulting in the death of 26 civilians. The most intense military confrontation since 1971 has caused a global capital market shock: spot gold once fell below $3400 per ounce, but due to the United Nations warning that “the world cannot afford the Indo Pakistani war”, the rebound in safe haven sentiment pushed gold prices to around $3380. Even more dramatically, on the 8th, Trump suddenly declared his willingness to be a mediator, but was accused of using mediation to promote arms sales and sow discord between China and Pakistan. 

1、 Conflict escalation: from ‘limited strikes’ to’ civilian casualties’, UN urgently mediates

At 1:05 am on May 7th, India launched the “Operation Sindore” and launched 24 missiles at 9 targets in Punjab Province and Pakistan controlled Kashmir, including mosques, residential areas, and other civilian facilities, resulting in the death of 26 people, including 2 children. The Pakistani military launched a counterattack within half an hour, relying on a combination of Chinese made J-10CE fighter jets and PL-15 missiles, and shot down five Indian fighter jets including the Rafale and Su-30, destroying a brigade headquarters of the Indian military. This is the first time Pakistan has shot down a Rafale fighter jet in an aerial battle, highlighting its air defense system advantages (Hongqi-9P long-range missile+active phased array radar).

UN Secretary General Guterres urgently called for “restraint” on the 7th, stating that “military means are not a solution”. On the same day, the Chinese Ministry of Foreign Affairs expressed concern over the deterioration of the situation and called on both sides to avoid escalation. However, India strongly claims that its actions are aimed at terrorist facilities and demonstrate restraint, while Pakistan accuses India of launching cowardly attacks and threatens that “water resources will shed the blood of Indians” – India has unilaterally suspended the Indus River Treaty and cut off 60% of Pakistan’s drinking water sources.

2、 Behind Trump’s’ mediation ‘: Military dealers’ calculations and geopolitical games

On May 8th, Trump suddenly changed his tone, stating that “both India and Pakistan have good relations and are willing to stop the war immediately,” but three real intentions were exposed:

Arms business: In 2024, India will purchase over $5 billion worth of American made Apache helicopters and other equipment. This conflict may stimulate India to increase its F-35 orders. According to Pakistani media, the range of the PL-15 missile that shot down the Rafale missile by the Pakistani army reached 200 kilometers, far exceeding the range locked by Indian radar (60 kilometers), exposing the disadvantage of American made equipment.

Diverting China and Pakistan: Trump deliberately emphasized in the mediation statement that “Chinese weapons play a crucial role in Pakistan”, attempting to attribute the conflict to “Chinese military expansion” and weaken the influence of the China Pakistan Economic Corridor (CPEC) in South Asia.

Shift focus: The US trade deficit surged to $140.5 billion in March, and Trump used mediation to shift domestic criticism of tariff policies. His staff admitted, “India and Pakistan’s petty antics are in the best interest of the United States – they stimulate the demand for arms while avoiding US military intervention

3、 The gold market: a roller coaster ride between safe haven sentiment and the US dollar game

Short term volatility: On the first day of conflict escalation (May 7th), spot gold fell 1.7% to $3370 due to expectations of “controllable conflict”. As of 14:00 on May 8th, the gold price was at $3337, fluctuating by over $70, continuing today’s morning session and experiencing a roller coaster ride.

The India Pakistan conflict has become not only a regional crisis, but also a “proxy battlefield” for great power games. Trump’s “tug of war” drama cannot conceal the background of arms dealers, while the gold market is experiencing a cycle of “safe haven wait and see safe haven again”. Whether India and Pakistan break through the ‘nuclear taboo’ will determine whether gold can start a new bull market.