Gold as a Core Asset Class in a Trump-Driven Geopolitical Landscape

In an era marked by escalating trade wars, policy-driven economic turbulence, and a reconfiguration of global supply chains, gold is reasserting itself as a cornerstone of strategic portfolio reallocation. The Trump administration's aggressive 2024–2025 tariff policies—a cornerstone of its “America First” agenda—have catalyzed a perfect storm of inflationary pressures, geopolitical uncertainty, and currency devaluation risks. These dynamics are reshaping asset allocation strategies, with gold emerging as a critical hedge against macroeconomic volatility.

The Macroeconomic Tailwinds Fueling Gold's Resurgence

President Trump's imposition of a 10% universal tariff on all imports, with higher levies on trade deficit partners, has triggered a chain reaction of economic distortions. By June 2025, U.S. inflation hit 2.7% annually, driven by price hikes in sectors like home furnishings and toys—industries heavily impacted by tariff-driven cost inflation. While this rate may seem modest, it is part of a broader trend: global inflation remains stubbornly elevated due to disrupted supply chains and retaliatory trade measures from China, the EU, and other trading partners.

Gold thrives in such environments. As a non-yielding, tangible asset, it gains value when fiat currencies lose purchasing power. The U.S. dollar's relative strength has waned amid the Federal Reserve's prolonged dovish stance and the administration's push for energy and manufacturing self-sufficiency. Meanwhile, central banks—China's People's Bank of China chief among them—have aggressively added 244 tonnes of gold to global reserves in Q1 2025 alone, signaling a strategic shift away from dollar-centric reserves.

Geopolitical Uncertainty: The Catalyst for Safe-Haven Demand

The Trump administration's tariff policies have not merely been economic—they are geopolitical in nature. By framing trade as a national security issue, the administration has exacerbated tensions with China, the EU, and other key partners. This has led to a surge in gold demand as investors seek refuge from currency volatility and trade-related disruptions.

J.P. Morgan analysts argue that a “universal tariff scenario” could supercharge gold prices, projecting the metal to reach $3,000 per ounce by Q4 2025. This forecast is underpinned by three key factors:
1. Inflationary Tailwinds: Tariffs inherently raise production costs, which are ultimately passed to consumers. This creates a self-reinforcing cycle of inflation that erodes the real value of paper assets.
2. Currency Devaluation Risks: As the U.S. dollar faces downward pressure from trade deficits and fiscal expansion, gold's inverse relationship with the greenback becomes a compelling investment thesis.
3. Policy Uncertainty: Trump's unpredictable trade agenda—coupled with retaliatory measures from trading partners—has heightened market volatility, as evidenced by the VIX (volatility index) averaging 27.3 in 2025, well above its 10-year average of 18.2.

Strategic Portfolio Reallocation: Why Gold Belongs in Core Holdings

For investors, the case for gold is no longer speculative—it is structural. The metal's unique properties as a hedge against inflation, currency devaluation, and geopolitical risk make it an indispensable diversifier in a world of escalating uncertainties. Here's how to approach its integration into a strategic portfolio:

1. Allocation Ranges: Institutional investors have increased gold allocations to 7.2% in 2025 (up from 4.8% in 2023), while 68% of high-net-worth individuals have boosted their gold holdings since 2023. A 5–10% allocation to gold is prudent for most portfolios, given its low correlation with equities and bonds.
2. ETFs and Physical Holdings: While gold ETFs remain 18% below their 2024 peak, they offer liquidity and accessibility. However, physical gold (bullion or coins) is increasingly favored by investors wary of systemic risks in financial markets.
3. Active vs. Passive Management: Gold's performance in both rising and falling interest rate environments (its “smile profile” relative to Treasury yields) makes it a dynamic asset. Passive strategies should focus on long-term holding, while active investors can capitalize on volatility through options or leveraged ETFs.

The Road Ahead: A Golden Decade?

The macroeconomic and geopolitical tailwinds for gold are likely to persist. Trump's focus on reshoring manufacturing and reducing trade deficits may intensify trade tensions, while central banks' gold-buying spree is expected to continue. The World Gold Council notes that gold has historically outperformed during trade wars, delivering 12.3% average annual returns in such periods.

Investors should also monitor the Fed's policy trajectory. A dovish pivot in 2025—driven by global economic fragility—could further amplify gold's appeal. Meanwhile, the metal's role as a hedge against currency instability (e.g., China's recent gold purchases) underscores its geopolitical significance.

Final Takeaway

Gold is no longer a niche asset—it is a core component of a resilient, diversified portfolio in a Trump-driven geopolitical landscape. As tariffs, trade wars, and fiscal expansion continue to reshape global markets, gold's role as a store of value and inflation hedge becomes increasingly vital. For investors seeking to navigate the turbulence ahead, strategic reallocation toward gold is not just advisable—it is imperative.

Investment Advice: Consider increasing gold exposure to 8–10% of your portfolio, prioritizing physical gold for long-term holdings and gold ETFs for tactical adjustments. Monitor central bank activity and geopolitical developments for signals of further gold price momentum.