• Spot gold hits an all-time high of $3,092/oz
• Gold shines amid geopolitical risks and economic uncertainty
• Fed rate cuts in 2025 support gold prices

Gold prices surged to an all-time high of $3,092/oz in early 2025, fuelled by tariffs uncertainty, trade tensions, weaker dollar, expectations of interest rate cuts by the Federal Reserve, stronger inflation, budget deficit expansion and increased economic growth risks.

Gold continues to uphold its status as a safe-haven asset, remaining a popular choice among investors and central banks seeking to preserve capital amid economic instability, geopolitical conflicts, and policy shifts under President Donald Trump.

Gold Surges Past $3,000 Amid Geopolitical Risks and U.S. Tariffs

Gold historically thrives in times of uncertainty, and 2025 is proving to be no exception. The collapse of the Israel-Hamas ceasefire, sluggish Russia-Ukraine peace talks, and rising tensions in the South China Sea are all contributing to sustained demand for gold.

The geopolitical outlook remains fluid. Trump’s return to the U.S. presidency could heighten trade tensions, particularly with China, potentially triggering a trade war that would further bolster gold prices.

After gaining 25% in 2024, the yellow metal started the year on a strong foot, rising more than 16% YTD. The precious metal first breached the $3,000 mark on the 13th of March and has continued its climb, reaching a record high of $3,092 per ounce as investors sought the metal as a safe haven amid escalating geopolitical tensions in the Middle East and ongoing tariff actions from U.S. President Donald Trump.

The latest driver has been the escalating tensions in the Middle East, on top of the broader economic uncertainty surrounding the U.S. Meanwhile, President Donals Trump has reaffirmed plans for sweeping U.S. tariffs, including a 25% duty on steel and aluminium that took effect in February. Additional Trump’s announcement of duties on imported cars and light trucks, reciprocal and sectoral tariffs set to be introduced on the 2nd of April, are adding to market uncertainty.

Investors seeking to hedge against inflation with real assets are turning to gold, as it avoids the tariff risks associated with industrial-linked commodities during trade conflicts.

The Impact of Federal Reserve Policy on Gold Prices

Gold prices soared to an all-time high last Wednesday, after Federal Reserve Chair Jerome Powell’s remarks reinforced expectations of monetary easing. While the Fed kept interest rates unchanged as widely anticipated, it signalled a potential 50-basis-point rate cut by the end of the year, fuelling investor optimism.

With gold firmly in a bull market and trading above $3,000 per ounce, its upward momentum is being driven by heightened uncertainty and growing concerns over inflation. The Fed maintained its benchmark rate between 4.25% and 4.50%, but policymakers revised their inflation forecast higher while lowering economic growth projections, largely in response to the Trump administration’s newly imposed tariffs.

Jerome Powell acknowledged during the FOMC meeting that inflationary pressures could persist longer than expected, partly due to the impact of these tariffs.

As a traditional safe-haven asset, gold thrives in times of economic uncertainty and inflationary risk. Meanwhile, Fed fund futures indicate a 66% probability of rate cuts resuming in June, up from 57% before the central bank’s latest decision. With lower interest rates reducing the opportunity cost of holding non-yielding assets, gold’s appeal is set to remain strong. A potential economic turmoil from tariff policies could push gold prices even higher in the coming months.

Central Banks’ Gold Purchases Remain Strong

One of the strongest pillars of support for gold prices has been consistent central bank demand. According to the World Gold Council, countries such as Poland, Hungary, China, and India have continued accumulating gold as part of broader reserve diversification strategies. A survey of central banks in mid-2024 indicated that 69% expect gold to represent a larger portion of global reserves over the next five years.

The de-dollarization trend, while gradual, suggests that central banks will maintain a steady level of gold buying, providing long-term price support.

Source: TradingView

Final Thoughts

With economic uncertainty, changing monetary policy outlook, and geopolitical risks at play, gold is poised to remain a key asset in 2025. As markets continue to adjust to policy shifts and global events, gold’s resilience as a safe-haven asset is likely to keep it in the spotlight for the foreseeable future.

With U.S. equities and bond yields under pressure, gold is increasingly viewed as a hedge against market instability.

Gold’s outlook for 2025 will be influenced by several key factors, including Federal Reserve policy, geopolitical developments, U.S. economic policy, and central bank demand. If the Federal Reserve implements two additional rate cuts, gold could benefit from lower real yields due to its traditional inverse relationship with interest rates. Geopolitical tensions, such as global conflicts or trade disputes, could strengthen gold’s appeal as a safe-haven asset. Additionally, U.S. economic policies, including inflation trends, tax policies, and tariff measures introduced by the Trump administration, will play a significant role in determining gold’s price direction. Meanwhile, central banks are also expected to continue accumulating gold in this environment, supporting prices.

Gold is up roughly 16% year to date after gaining over 27% in 2024, outpacing the S&P 500’s gain of 23%. While short-term corrections and consolidations are possible, gold’s bullish structure remains intact and higher price levels are likely by the end of the year.

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