Because the saying goes, “What goes up must come down,” but when you’ve been testing the worth of gold currently, you may think this axiom doesn’t apply to the valuable metal.
On Wednesday, spot gold hit one other all-time high, reaching $3,061.60 per ounce before dropping barely to settle at $3,057.50 by the tip of the trading day. Over the past yr, gold prices have shot up by roughly 40% — a remarkable rally that (for the moment, no less than) shows no signs of slowing down. Just because the start of 2025, it has risen nearly 15%.
As recently as January, experts predicted that gold might reach the symbolically significant threshold of $3,000 an oz. by the tip of the yr. In point of fact, it only took until March 14 to hit that benchmark. It’s continued to tick upward in the times since.
“Gold is grinding higher on elevated uncertainty,” metals trader Tai Wong told Reuters.
What’s propelling the yellow metal to every fresh recent record it notches?
In a word, uncertainty. With the Trump administration’s trade policy changing seemingly by the hour, stubbornly persistent inflation and concern that tapped-out — and freaked-out — Americans are keeping their wallets closed, investors are facing an ideal storm of economic uncertainty.
Of their attempting to find a protected harbor, it seems many are turning to gold, perhaps the oldest and most enduring safe-haven asset. When economic or geopolitical conditions get bumpy, investors flock to gold due to its perceived stability in comparison with the volatility of stocks or commodities.
Gold also is usually held as a hedge against inflation, one other contributor to its current popularity. While inflation has actually cooled from the 9.1% peak rate it hit in June 2022, it stays higher than officials — not to say unusual consumers — wish to see.
What’s more, policymakers just sent their clearest signal yet to the market that they expect inflation to stay uncomfortably high through 2025. On Wednesday, the Federal Reserve’s rate-setting committee released its quarterly economic projections, which showed that officials now expect so-called core inflation to extend at an annualized rate of two.8%. That’s up from a projection of two.5% officials released just three months ago and nearly a full percentage point higher than the central bank’s 2% goal.
Trump’s trade wars take gold higher
If “uncertainty” is the word that best sums up the engine powering gold’s recent rise, the second-most-important word of explanation could be one which’s been in a number of headlines currently: tariffs. Aggressively protectionist trade policies being pursued vigorously, and sometimes chaotically, by the Trump administration are driving much of the gloomier outlook around inflation and economic activity.
Along with raising steel and aluminum tariffs to 25%, raising tariffs on Chinese imports and levying 25% tariffs on Canadian and Mexican imports (with some exceptions), President Donald Trump and White House officials have announced a recent raft of trade sanctions, unprecedented in size and complexity, currently scheduled to take effect April 2. These “reciprocal tariffs” would try to capture not only what tariffs other countries levy on U.S. imports, but a number of other policies the administration claims hurt the U.S.
Secretary of the Treasury Scott Bessent said on Fox Business that trading partners would face a “tariff wall” in the event that they didn’t conform to negotiate terms the administration finds more favorable. But no one really knows what that appears like.
“All of us await further clarity on the feed-through effects of trade policy right away,” Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, said in a press release Wednesday.
Despite this lack of visibility, economists across the political spectrum warn that tariffs will worsen inflation by driving prices paid by American businesses and consumers higher. Expectations that these policies could hurt economic growth have also driven down the worth of the dollar. Gold and the dollar typically move inversely of one another; a weak dollar tends to be correlated with robust gold prices, and vice-versa.
Ultimately, when Wall Street is jittery, gold is what sparkles in investors’ eyes.
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