Gold Is Hitting Records Amid Tariff Uncertainty. Should You Invest?

The global trade landscape in 2025 has become a battleground of tariffs, exclusions, and geopolitical brinkmanship—yet gold is thriving. As the U.S., China, and other major economies clash over trade policies, the yellow metal has surged to historic highs, driven by safe-haven demand and structural macroeconomic tailwinds. But with volatility spiking and uncertainties mounting, is this the right time to bet on gold? Let’s dissect the data.

The Immediate Impact of Tariff Volatility

Tariff-related news has become a flashpoint for gold’s short-term swings. Take the April 2025 announcement that the U.S. excluded semiconductor equipment and pharmaceutical imports from broader tariff plans: gold prices dropped 1% to $3,321 per ounce as investors rotated into risk-on assets like equities. The S&P 500 surged 2.3% the same day, but volumes on the COMEX gold futures exchange hit 1.2 million contracts—18% above average—hinting at speculative positioning ahead of further policy moves.

Yet these dips are proving fleeting. Sectoral exclusions, while easing near-term supply chain risks for $86 billion in trade, have done little to resolve the broader trade war. The MIT Trade Uncertainty Index (TUI) remains elevated, with each 10-point increase correlating to a 2.1% gold rally over six months.

Why Gold Keeps Climbing Despite Temporary Pullbacks

The long-term narrative for gold is far stronger than the noise of daily tariff headlines. Three pillars underpin its rally:

1. Dollar Weakness and Negative Real Yields
   The U.S. Dollar Index (DXY) has fallen 6.8% year-to-date, while 10-year Treasury real yields remain negative (-0.35%). This combination makes gold far more attractive than bonds. Goldman Sachs now forecasts a $3,700/oz target by year-end, with 40% of the upside tied to dollar depreciation.

2. Central Bank Buying Frenzy
   Central banks gobbled up 1,136 tonnes of gold in Q1 2025, led by China (298 tonnes) and India (127 tonnes). These purchases, which absorbed 33% of global supply, have created a “floor” for prices. The ECB’s gold reserves now total $780 billion (45% of its external holdings), underscoring the metal’s role as a geopolitical stabilizer.

3. ETF Inflows and Retail Demand
   Global gold ETFs saw 84-tonne inflows in Q1—the strongest quarterly surge since 2020—while Asian retail demand hit 417 tonnes. Total investment flows reached $18.7 billion year-to-date, double 2024’s full-year total.

The Historical Blueprint for Gold’s Trade War Gains

History shows gold thrives during trade disputes. Since 2000, 75% of tariff announcements triggered a 4.2% average spike within five days. The 2018–2019 U.S.-China trade war saw gold rise 17% over six months—a pattern repeated in 2025, with prices up 20.4% year-to-date.

Inflation is another accelerant. Peterson Institute models estimate each 10% tariff hike adds 0.8–1.2% to CPI, squeezing real yields. Breakeven inflation rates in TIPS markets now sit at 2.7%, aligning with gold’s historical 7% annual returns during high-inflation periods.

The Risks and Technical Picture

No investment is without risks. A G7 agreement to roll back tariffs could trigger a 3–5% correction, while ETF outflows exceeding 50 tonnes/month or real yields breaching 1.5% could reverse momentum.

Technically, gold faces key resistance at $3,370 (April highs) and support at $3,280 (Fibonacci retracement). The recent crossover of the 50-day moving average ($3,312) above the 200-day MA ($3,288) signals a bullish shift. However, RSI readings at 58 suggest consolidation ahead of renewed gains.

Conclusion: Gold’s Bull Run Isn’t Over—But Proceed with Caution

The data is clear: gold’s ascent in 2025 is structurally supported by trade uncertainty, dollar weakness, and central bank demand. Goldman Sachs’ $3,700/oz year-end target—and its $4,100/oz 2030 projection—seem plausible if trade tensions persist.

However, investors should avoid chasing rallies. Consider:
- Allocation: Target 8–15% of a portfolio for gold, leveraging its -0.21 correlation with equities.
- Timing: Use dips below $3,300 to build positions, but avoid overexposure during seasonal volatility (July–August).
- Diversification: Pair gold with inflation-linked bonds (e.g., TIPS) and low-correlation assets like REITs.

The risks are real, but the tailwinds are stronger. For now, gold remains the ultimate insurance policy in a world of tariff-driven chaos.