Gold Rebounds as Bargain-Hunting Kicks In Amid Trade War Fears

The price of gold, which spiked to a record $3,500/oz in April 2025 before retreating to $3,318/oz, has become a magnet for investors seeking shelter from geopolitical and economic storms. As bargain hunters pounce on dips below $3,000/oz, the metal’s trajectory in Q2 2025 hinges on whether trade war tensions, central bank demand, and inflationary pressures can sustain its ascent—or if technical overbought conditions will trigger a meaningful correction.

The Trade War Catalyst: Trump’s Policies Fueling a “Fear Premium”

The primary driver of gold’s rebound is the deepening U.S. trade war, fueled by President Trump’s erratic tariffs and protectionist rhetoric. Analysts note that tariffs on Chinese, European, and Japanese goods are acting as “taxes on imported goods,” inflating consumer prices and heightening economic uncertainty. This has created a persistent “fear premium” that has investors buying gold on dips. For instance, gold surged in early April after Trump announced a 25% tariff on European autos—a move analysts called “a shot across the bow of global markets.”

The market’s psychology is clear: traders are treating any short-term price pullbacks as buying opportunities. “Gold is acting like a volatility hedge in a world where geopolitical risks are escalating faster than they’re resolving,” said a commodities analyst at Goldman Sachs.

Central Banks Double Down: Gold as a Dollar Hedge

Central banks, particularly in emerging markets, are another pillar of support. China’s central bank, for example, has been aggressively adding to its gold reserves to hedge against U.S. dollar exposure and trade conflict risks. shows purchases hit 1,045 tonnes in 2024—the third consecutive year above 1,000 tonnes—accounting for 74% of their total reserves. JP Morgan estimates that central banks could buy an average of 710 tonnes per quarter in 2025, a pace that would push prices higher still.

Inflation and the Vanishing Opportunity Cost

Gold’s traditional role as an inflation hedge has also gained traction. Supply chain disruptions and tariff-driven price hikes have pushed global inflation higher, while nominal bond yields have stagnated. This has driven real yields (nominal yields minus inflation) into negative territory, making non-yielding gold more attractive. JP Morgan’s “smile profile” theory underscores this: gold rises when real yields fall or rise, acting as both an inflation hedge and a geopolitical insurance policy.

Technical Indicators: Overbought, but Bulls Still in Charge

Despite its meteoric rise, gold faces a technical reckoning. The monthly RSI stands at 80+, a level that has historically preceded corrections, such as during the 2011 peak and 2020 pandemic lows. Analysts predict a pullback to $2,800/oz—the 200-week moving average—could occur, but this is seen as a buying opportunity. illustrates this support level.

Resistance levels are key: $3,200/oz (short-term) and $3,600/oz (medium-term). If gold breaches $3,600, it could accelerate toward JP Morgan’s $3,675/oz Q4 2025 target.

Risks Lurking in the Shadows

The path isn’t without pitfalls. A U.S. economic rebound could prompt the Fed to hike rates, reducing gold’s appeal. A sudden halt to central bank purchases—or a U.S.-China trade deal—could also derail momentum. Yet, these risks are seen as low-probability events in the current climate.

Conclusion: A Volatile Quarter, but the Winds Favor Gold

Q2 2025 is a pivotal period for gold. While technical overbought conditions may lead to short-term volatility, the macroeconomic tailwinds—trade wars, central bank demand, and inflation—are too strong to ignore. With central banks holding 74% of reserves in gold and analysts projecting $3,675/oz by year-end, the metal’s long-term story remains intact.

For investors, the key is to view dips below $2,800/oz as buying opportunities. As one trader put it: “This isn’t just a trade—it’s a hedge against the unraveling of globalization.” With gold’s “fear premium” now embedded in its price, the question isn’t whether it will rise further, but how high the next leg of this bull market will climb.

Final Takeaway: Gold’s rebound in Q2 2025 reflects a confluence of geopolitical, monetary, and inflationary forces. While short-term volatility is inevitable, the fundamentals suggest the metal is on course to test—and likely exceed—$3,600/oz by year-end, cementing its status as the ultimate crisis hedge.