Gold’s Unstoppable Rise: How Trump’s Tariff Policies and Global Uncertainty Are Driving Prices to New Highs

Gold has firmly established itself as the best-performing asset of the “Trump trade” era, rising faster than equities, bonds, and even cryptocurrencies. Since Donald Trump’s inauguration, the precious metal has surged more than 7%, reaching a new record of 2,942 dollars per troy ounce this week. In comparison, the S&P 500 has gained less than 2%, while bets on a stronger dollar and higher Treasury yields have struggled to generate returns. The reason behind this gold rally? Tariff fears, global economic instability, and a growing shift away from the U.S. dollar.

How Tariffs Are Fueling Gold’s Ascent

With Trump rolling out aggressive tariffs on China and other major trading partners, concerns over a global trade war have intensified. History has shown that when trade contracts, gold prices tend to rise—just as they did during the COVID-19 pandemic and the 2008 financial crisis. Analysts believe that escalating tariffs will disrupt global commerce, weaken economic growth, and drive inflation higher, all of which create the perfect conditions for gold to thrive.

The surge in demand is evident in the growing gold stockpile in New York, which has soared 116% since the U.S. election. Investors are withdrawing gold from London, the world’s largest physical gold trading hub, and moving it into American vaults. This shift has caused weeks-long delays for gold withdrawals from the Bank of England, further illustrating the scale of demand among U.S. investors seeking safety in physical gold.

Central Banks and the Rush to Ditch the Dollar

Beyond trade policy concerns, a de-dollarization trend is accelerating, with central banks across the globe continuing to buy record amounts of gold. In 2024, global central banks added over 1,000 metric tons of gold to their reserves for the third consecutive year. The main driver behind this surge? The freezing of Russia’s central bank assets in 2022, which sent a clear message to other nations about the risks of holding too many dollar-based reserves.

China and India, in particular, have been ramping up their gold purchases as part of a long-term strategy to reduce reliance on the U.S. dollar. The People’s Bank of China (PBoC) increased its reserves by 5 metric tons in January 2025, bringing its total gold holdings to 2,285 metric tons, or 5.9% of its total reserves. This is part of a broader trend where emerging economies are shifting away from U.S. Treasuries and instead accumulating gold as a safeguard against potential economic and geopolitical risks.

Gold as the Ultimate Hedge Against Inflation and Economic Uncertainty

With inflation concerns resurfacing, gold’s appeal as an inflation hedge remains as strong as ever. Analysts note a direct correlation between rising tariff announcements and gold prices, meaning that as trade tensions escalate, investors increasingly turn to gold for protection.

Despite the Federal Reserve’s recent efforts to control inflation, concerns over rising U.S. government debt and slower-than-expected rate cuts have kept gold demand high. While bond yields briefly spiked to 4.8%, they have since retreated to 4.48%, suggesting that investors are uncertain about the long-term economic outlook.

The U.S. dollar’s recent decline has further boosted gold prices. Since gold is priced in dollars, a weaker dollar makes it cheaper for foreign investors to buy gold, increasing global demand. However, some analysts warn that if the dollar strengthens again, it could temporarily slow down gold’s ascent.

Wall Street’s Changing Outlook on Gold

As gold continues to smash records, major financial institutions have been forced to upgrade their price forecasts. Both UBS and Citigroup recently raised their 2025 price targets to 3,000 dollars per troy ounce, while Goldman Sachs now predicts gold will rise another 8% this year, reaching 3,100 dollars per ounce by December 2025.

The main reason for these upward revisions? Stronger-than-expected central bank demand. Goldman Sachs estimates that gold buying on the London over-the-counter (OTC) market has increased fivefold since the freezing of Russia’s assets. Before 2022, average monthly central bank demand on this market was 17 metric tons; in December 2024, that figure skyrocketed to 108 metric tons. If central bank purchases remain at these elevated levels, Goldman Sachs believes gold could surge as high as 3,300 dollars per ounce by the end of 2025.

What Could Derail Gold’s Rally?

While most signs point to continued strength in gold, a few risks could temper its rise. The most significant would be fewer-than-expected interest rate cuts by the Federal Reserve. If the Fed decides to keep rates steady, rather than cutting them as markets expect, the opportunity cost of holding gold (which does not yield interest) could increase. In this scenario, Goldman Sachs projects that gold may only reach 3,060 dollars per ounce instead of its base-case forecast of 3,100 dollars.

Another potential downside risk is speculators reducing their long positions in gold futures. Currently, many investors are betting heavily on rising gold prices, but if market conditions change and uncertainty fades, some may take profits, causing temporary price dips. However, as long as policy uncertainty remains high, analysts believe these corrections will be short-lived.

Silver’s Parallel Rally: A Strong Contender?

While gold has been dominating headlines, silver has also been experiencing a powerful rally. Since the start of 2025, silver has surged 33%, benefiting from its dual role as both a precious metal and an industrial commodity. The growing demand for electric vehicles (EVs) and solar panels, both of which require silver for production, has added fuel to its rise.

However, like gold, silver faces some challenges. The gold-to-silver ratio, which measures the relative value of the two metals, remains high at 89:1, suggesting that silver may have more room for growth if gold continues its rally.

The Outlook for Gold in 2025: More Records Ahead?

Looking ahead, most analysts expect gold to remain on an upward trajectory. The combination of Trump’s aggressive trade policies, global economic uncertainty, and strong central bank buying provides a powerful foundation for continued gains.

Key factors to watch include:

• Further trade war escalations: If more tariffs are introduced, gold prices are likely to rise further.
• Interest rate cuts by the Fed: The pace and depth of rate cuts could determine how attractive gold remains compared to bonds.
• Central bank demand: If institutions continue purchasing at record levels, gold could easily surpass 3,300 dollars per ounce.
• U.S. fiscal policy: Rising government debt and budget deficits may weaken confidence in the dollar, further boosting gold’s appeal.

With uncertainty at an all-time high, gold remains the asset of choice for investors looking to protect their wealth.