Gold is a ‘sleeping giant’. History shows that gold prices move in a narrow range for years, if not decades, until suddenly spiking. Between October 2011 and October 2022, the gold price trended lower and remained in the $1,700 range. From November 2022, gold saw a golden run with the price jumping from $1,700 to make an all-time high record of $3,500 this month.

The last time the sleeping giant woke up for the sprint was from October 2018, when gold was $1,130 to reach $1,984 in August 2020, a 75% gain in less than two years.

In the recent bull run in gold, the big up move started in 2023 when gold rose 13%. In 2024, the same story unfolded, and gold gained 27%.

If you are wondering what led to the sudden interest in gold, we have curated them here. While the reasons that boosted gold in 2023-24 remain valid even today, there is one more to consider in 2025: Trump tariffs.

Trump Tariff and Gold Price

All thanks to Trump tariff announcements, including the reciprocal tariffs on all countries, gold is already up by 25% this year.

The world knows that the Trump tariffs will potentially dampen economic activities. The biggest concern for global economies is the trade war between the two largest economies, the US and China.

The trade war is predicted to disrupt global supply chains and potentially impact bond and currency markets due to economic uncertainties. Such a scenario is the perfect breeding ground for the gold.

But gold seems to have hit a speed-breaker. After touching $3,500 on April 22, gold has lost almost $200 and trades around $3,300 now. In India, the gold rate today is Rs 95,320 after touching Rs 1 lakh for 10 grams of 24 carat gold on April 22.

Gold fell past $3,290 per ounce on Friday, wiping out gains from the previous session after Beijing exemptions on select U.S. commodities from its 125% tariffs, signaling a thaw in the trade war and reducing bullion’s appeal as a hedge.

Simultaneously, the dollar index is nearing 100, making dollar-priced gold more expensive for overseas buyers, while U.S. Treasury yields moved higher. All three factors are leading to selling pressure in gold.

Gold Headwinds Gather Pace

So, what could be the headwinds that suddenly led to the selling pressure in gold?

Trump declared that he would slow down on taking stiff measures against China as part of his tariff tirade. Even China is taking measures to de-escalate the trade war. In reality, confusion persists as both countries contradict themselves.

But the fact that the trade war is not escalating seems to have worked, with the gold price slumping.

Another Trump factor played out simultaneously. Since his first day in office, Trump has been vocal by targeting the US Fed chief Powell, forcing him to start cutting interest rates. Trump has even threatened to fire Powell if he doesn’t listen to his rate cut.

One fine day, Trump softened his stand on Powell. And, as uncertainties around the Fed’s independence subsided, gold continued its fall.

Then, there are non-Trump factors as well. US inflation is trending lower, but the US Fed is playing the waiting game.

“High tariffs will definitely not make America great again, at least economically. Inflation rates appear to be easing at least in the near term. Thus, if the US government follows logic, the two major levers driving gold will become weaker and reduce gold from these unreasonable levels,” says Dr Smita Mazumdar, Professor – Finance and Accounting, Program Director – PGDM, Great Lakes Institute of Management, Gurgaon.

The relationship between gold and the US dollar cannot be undermined. The Dollar index, which is currently below 100 for the first time in over three years, supports higher gold prices.

But as trade tensions ease, the dollar could regain its strength, and that’s where demand for gold will start to crumble. “A potential drop from current highs in gold price could be triggered by a stronger US dollar, easing geopolitical tensions, or a rise in interest rates by major central banks like the US Federal Reserve,” says Aksha Kamboj, VP, India Bullion & Jewellers Association (IBJA) and Executive Chairperson, Aspect Global Ventures.

Treasury yields are regarded as one of the best indicators of the state of the country’s economy. The US 10-Year yield shot up to 4.5% recently and is another red flag for gold. “A rise in U.S. Treasury yields could also weigh on gold’s appeal. Yields could see an increase if investors continue to flee US assets,” says Konstantinos Chrysikos, Head of Customer Relationship Management, Kudotrade.

As economic uncertainties look to fade away, gold will see some pressure as other assets, such as equities, will start to shine. “Valuable safe haven demand will decline with stronger global economic stability or reduced geopolitical tensions. Strong performance in equity markets will divert investor interest away from gold,” says Dr. Renisha Chainani, Head – Research at Augmont.

But wait! The economic world is changing fast. Trump cannot be relied on, given his recent backpedaling on several of his actions. Also, how will US inflation pan out once reciprocal tariffs are in place, if at all they are implemented, remains to be seen. Importantly, central banks are continuously buying gold, and that’s where the big demand leading to higher prices is being witnessed.

Currently, the odds for Trump to crash the gold party are low till year-end, although small blips can’t be ignored either.

Further, over the coming months, it will be important to watch how the dollar and the US Treasury are affected by all of the economic repercussions.

Lastly, there’s always an X factor that may emerge out of nowhere and push gold prices higher from the current levels.

Also Read: Gold rate doubles in less than 3 years as gold price jumps 100% to Rs 1 lakh

And, if the gold price dips, it is always a good opportunity to add more to maintain an exposure of 5-10% of your investment portfolio in gold.

Also Read: Gold Price Prediction: Gold expected to post 71% return in 2025