Trump Drove Up the Price of Gold—Could He Now Crash It?
While the factors that propelled gold prices in 2023–2024 are still very much alive, Trump tariffs have emerged as an additional element to monitor in 2025.
- A stronger US dollar,
- reduced geopolitical tensions,
- or an increase in Federal Reserve interest rates could collectively weigh on gold’s current elevated levels.
Gold: The Sleeping Giant Awakens
Historically, gold has behaved like a sleeping giant, often moving within a narrow range for extended periods before suddenly spiking.
- Between October 2011 and October 2022, gold mostly trended lower, hovering around the $1,700 mark.
- Beginning in November 2022, however, gold embarked on a strong rally, soaring from $1,700 to reach an all-time high of $3,500 this month.
The previous significant surge occurred between October 2018 and August 2020, when gold climbed from $1,130 to $1,984, marking a 75% gain within just two years.
In the latest bull run, gold prices rose 13% in 2023, followed by a sharp 27% increase in 2024, reflecting sustained bullish momentum.
The 2025 Catalyst: Trump Tariffs
The renewed Trump tariff policy, including reciprocal tariffs against all countries, has already pushed gold prices up by 25% this year.
- The looming threat of a trade war between the US and China has intensified concerns about global economic health.
- Such economic disruptions tend to boost safe-haven assets like gold.
However, after peaking at $3,500 on April 22, gold has faced some resistance, slipping back by nearly $200 to trade around $3,300.
- In India, the gold price similarly dropped from Rs 1 lakh to Rs 95,320 for 10 grams of 24-carat gold.
Emerging Headwinds for Gold
Several new developments have contributed to the sudden selling pressure on gold.
First, Trump softened his stance on aggressive tariffs against China, signaling a potential easing of tensions.
- Both the US and China have shown efforts toward de-escalation, although conflicting messages persist.
- A de-escalating trade war naturally dampens gold’s bullish drivers.
Second, Trump’s once aggressive posture toward Fed Chair Powell has mellowed.
- The easing uncertainty around the Federal Reserve’s independence weakened another pillar supporting high gold prices.
Non-Trump factors are also at play.
- US inflation has shown signs of cooling, and the Fed remains cautious, favoring a wait-and-watch approach.
- As inflation concerns diminish, so too does the urgency to hold gold.
According to Dr. Smita Mazumdar, high tariffs won’t economically benefit the US in the long term, and if inflation continues to ease, gold’s appeal could diminish further.
The Dollar, Yields, and Gold’s Vulnerability
The intricate relationship between the US dollar and gold remains crucial.
- A weaker Dollar Index (currently under 100) supports gold’s rise, but any rebound in the dollar could reverse those gains.
Aksha Kamboj of IBJA notes that a stronger dollar, along with rising interest rates and geopolitical stability, could collectively trigger a drop in gold prices.
Meanwhile, US Treasury yields have surged, with the 10-Year yield reaching 4.5%, suggesting economic optimism.
- Konstantinos Chrysikos emphasizes that higher yields typically weigh against gold’s attractiveness.
Additionally, improving global economic stability could prompt investors to favor equities over precious metals.
- Dr. Renisha Chainani highlights that safe-haven demand for gold may weaken as markets grow more confident.
Looking Ahead: Uncertainty Still Lingers
Despite the growing headwinds, the unpredictability surrounding Trump’s policies remains a wild card.
- Trump’s frequent reversals on major policies create persistent uncertainty.
- Furthermore, if reciprocal tariffs are enacted, the effect on US inflation and consumer prices could reignite demand for gold.
Another critical factor is central bank gold buying, which continues robustly and provides solid underlying demand for the metal.
At present, the probability of Trump crashing the gold rally appears low at least until the end of the year, though minor corrections cannot be ruled out.
As we move forward, closely observing movements in the US dollar and Treasury markets will be key to understanding gold’s future trajectory.
And as always, the potential for an unexpected X-factor to jolt gold prices higher remains ever-present.
For investors, any significant dip in gold prices presents a valuable opportunity to maintain a 5-10% exposure to gold within their investment portfolios.
