Donald Trump’s 2025 presidency, marked by aggressive policies and an “America First” agenda, has triggered global market chaos. Amidst this turmoil, gold has surged, reaching near $3,500 per ounce. Independent gold analyst Sanjiv Arole explores whether Trump’s actions alone are responsible for this volatility and gold’s meteoric rise, examining the complex challenges his administration faces.
‘Ati tithe mati’ is a Marathi proverb that can be interpreted as ‘anything in excess invariably leads to catastrophe’. Ever since Donald Trump assumed his presidency on 20 January 2025 his catastrophic executive orders, diktats and flip-flop decisions on tariffs have created chaos not only in the US but around the globe as well. His ‘America First’ clarion call may have won him the presidency but also protests in various cities in the US against his decisions. He has sent into turmoil global financial and banking sectors along with commodity and stock markets, etc. At the current moment, gold is the only one left standing, in fact surging ahead repeatedly to all-time high levels on a regular basis as its safe haven status came to the forefront.
Gold ended last week on Thursday (17 April 2025) around $3,359 per ounce. However, in less than the next day and half, gold was just shy of $3,500 per ounce at $3,499.70 per ounce (intra-day) in early Tuesday (22 April 2025) morning trading in Asia. Is Trump solely responsible for the chaos in global markets and rocketing gold to stratospheric highs? It is pertinent to note that the rest of marketplace is left far behind by gold, most of them declining as gold soared higher and higher like a kite.
Indeed, it would seem that the US administration has bitten more than what it can chew. Let us look at what Trump has on his plate.
(i) He is playing the peacemaker in the Ukraine war. However, he is pushing for it even as he blames Zelensky for the war. Even at the cost of alienating European countries in the NATO. He is also impatient about the pace of the peace process and even threatened to pull out of it. Then, he wants US presence in Gaza to ensure peace in the region. Trump has also initiated nuclear talks with Tehran but that too on his own terms. Not only that, the USA is firing missiles at the Houthies in an attempt to obliterate them and making the seas safer for commercial ships in that region.
(ii) Further, the US wants to take control over the Panama Canal, renamed Gulf of Mexico as Gulf of America unilaterally, aspires to take charge of Greenland and annexe Canada and make it an American state. As a result, alienating quite a few countries in the process due to the arbitrary manner in which the US announced it.
(iii) Within the US too there is internal strife with deportations, visa cancellations, grants being withheld or stopped from prestigious universities as America first gathers pace. Harvard has even sued the government over freezing of grants.
(iv)The tariff war initiated by Trump has caused widespread fears of higher inflation being stoked due to higher import costs as higher export duty being imposed by the US and a slowdown of the economy at the same time. The reluctance of Fed to cut interest rates only added fuel to the fire.
However, the piece de resistance has been the reciprocal tariffs initiated by the Trump administration. The decision to impose high tariffs on Canada, Mexico and China and then postponing the tariffs on Mexico and Canada for a short period baffled a few. Then, a hefty 25% tariff on all steel and aluminium products into the US compounded matters, leading to uncertainty and confusion. Thereafter, the 10% tariff on all of imports into the USA and the announcement of reciprocal tariffs on individual countries with a bizarre formula stumped many.
On the face of it the formula appears to be quite simple as it takes into account the trade deficit with a particular country divided by that country’s exports to the US to determine the reciprocal tariff on that country. However, trade between nations is not a zero sum game where exports match imports.
What is worth noting is that the USA became a major economic power as it maximised profits for its companies by outsourcing from outside and reducing cost of manufacture and as a result increasing profits, booming stock markets and a strong USD that became the reserve currency of the world. The US concentrated on selling arms and armaments to the world and with its vast energy stockpiles.
The sum total of it all was that the US became the strongest country in the world and probably only super power now in the world. But, during this process USA accumulated a huge debt burden of over $36 trillion and servicing of that debt became an albatross in managing the US economy. Probably, the Trump administration attempted to repair the damage or cure USA of all its ills with a remedy that turned everything upside down. However, it transpires that the medicine was worse than the ailment itself.
But, with China pushing back hard on the very high tariff on Chinese exports to the US, with Canada following suit with a stiff retaliatory duty on Canadian energy exports to the US things became hot for the US to handle. Further, with the EU and even Japan thinking of a response to the US reciprocal tariffs the Trump administration flip-flopped on the tariff front and immediately announced a 90-day moratorium on all reciprocal tariffs by the US. But, the trade war with China continued as both countries announced tit-for-tat higher tariffs and escalating the trade war to greater heights.
In a surprising move USA exempted certain electronic goods/component imports from China. However, China banned exports of certain key electronic components vital to the US defence and space sector. An important factor to be taken into account is the fact that China holds around $780 billion worth US bonds and Japan holds around $1 trillion worth of US bonds. Should the two countries decide to offload even a small portion of their US bond holdings all hell would break loose and cause utter chaos in the financial markets and ruin both the US and global economies. And whenever there is chaos the only winner left is gold. No wonder gold found itself on the threshold of $3,500 per ounce briefly on April 22, 2025.
Trump’s America First focus was expected to see US strong again, however, the immediate impact for a while was that all markets took a beating with the Dow, US dollar, oil, Bitcoins and all the precious metal, including gold declined quite sharply. In fact, gold ran away initially before falling to almost $2,900 per ounce by 6 March 2025. Thereafter, the yellow metal continued a steady climb back over $3,000 per ounce first and then even beyond $3,100 per ounce even as most of the other commodity and stock market indices as well as the USD index and Bitcoins fell by the wayside. The flip-flop by the administration on tariffs in April and the 90-day moratorium saw gold surge ahead slicing through $3,200, $3,300 and even $3,400 per ounce in almost just 10 days. In fact, gold even reached $3,500 per ounce mark briefly on 22 April 2025 along with higher WTI oil prices.
Gold was mainly fuelled by Central Bank buying, huge inflow into gold ETFs, a weak USD, stock markets sharp decline as well as decline in Bitcoins and other crypto currencies. However, the biggest factor that aided gold’s meteoric rise has been the US bonds that have become very jittery and threatened the very base of the US economy. All of which enhanced gold’s safe haven status. Having already alienated its NATO allies over the Ukraine war and literally throwing Zelensky under the bus in favour of Russia and leaving European allies holding the war baby, the US can now expect a hard response from the EU on reciprocal tax regime unleashed by the Trump administration. Trump’s USA is seen as an unreliable trade partner and not a responsible NATO ally.
Jerome Powell’s (Fed chief) views are that the US economy faces turmoil of a slow down due to tariff war begun by the US administration. He also opines that inflation as of now was around the parameters set by the fed and could see an upsurge in inflation due to trade policy unleashed by the USA. He does not foresee any reason to cut interest rates in a great hurry anytime soon. However, in case inflation soars in coming times, Jerome Powell’s classic response over the few years has been to hike interest rates to tame inflation and keep it around its target of 2%. With Trump’s insistence on immediate rate cuts, Jerome Powell and Donald Trump are on a collision course. In fact, Trump wants to sack Powell, but, that is easier said than done. For, the US Fed is an independent body and its chief cannot be removed by the US Congress or the Senate. Trump is looking towards Supreme Court judges to remove Powell. This story is yet to pan out and has some distance to travel. In the meantime, the resultant chaos can only benefit gold.
Meanwhile, gold crossed Rs.1,00,000 per 10 gms (including GST) in domestic bullion markets. As a result, scrap dealers became busy as people/investors flocked to book their notional profits. Unlike silver, gold is expensive and not easy to hold for long periods in a volatile market. They would like to buy on dips instead of staying long and wait for higher prices. The domestic gold market is at a huge discount and imports are at a standstill. Akshay Tritya on 30 April 2025 would depend very much on lower gold prices. Around Rs.1,00,000 per 10 gms, 30 April 2025 could be a damp squib. However, there is hope for retailers if current decline in gold price continues till 30 April 2025.
Finally, it has been a very volatile 2-3 days in the current week. The week began with gold much below $3,400 per ounce. On Monday, 21 April 2025 gold rose rapidly to not only cross $3,400 per ounce in a jiffy but also reach $3,500 per ounce intra-day. However, with profit booking taking over gold slumped to around $3,308 per ounce in just over a day even though its London pm close was $3,433 per ounce on 22 April 2025.
Probably, statements by US government officials stating that they would not escalate the trade war with China and with Trump saying that he would not try to remove Jerome Powell as Fed chief, gold’s onward march was not only stalled but beat a retreat. The yellow metal even fell sharply on 23 April 2025 and was seen trading around $3,324 per ounce in early morning trading in Asia.
As gold fell, the stock markets recovered, the USD index improved and Bitcoins made a recovery of sorts. However, all these indices were much below their 20 January 2025 levels, the day Trump assumed office as president of USA. Is gold in a temporary decline or has it reached its peak and on a downward slide? Will Trump try to cool down the volatility in all global markets or will he like Nero be busy on his console playing video games aka fiddle? Gold bugs would bet on Trump playing the fiddle, nay on the console playing video games!!