Precious Metals Surge as US Tariff Tensions Mount

The phrase ‘Running With The Hare and Hunting With The Hounds’ perhaps fits the incumbent US president to a T. For, in all the global hotspots the US president has been a key player, swooping down on Iran’s nuclear infrastructure with Israel, silently backing Israel and waiting to pounce on what remains of Gaza, in the Ukraine war playing supporter to both the sides alternatively and confusing one and all on bringing lasting peace in the region and in the recent Indo-Pak conflict, initially hunting with India on fighting with terror and then doing an about-turn and now aiming to hunt down India on the trade front with tariffs. However, in spite of all the above, he has not lost the main focus of the Nobel Peace Prize. But, where does gold figure in the scheme of things?

Once Trump exploded the tariff bomb shocking the entire world, gold zoomed ahead as it repeatedly scaled new all-time high levels every other day. In fact, it briefly crossed $3,500 per ounce on 22 April 2025. Gold bugs were happy and even envisaged $4,000 per ounce by the year-end. Investors flocked to gold as markets panicked even while jewellery demand nose-dived. Then, uncertainty prevailed as Trump went back and forth on tariff deadlines and looked more to cracking deals with nations in the wake of tariff threats in the background. This not only stalled gold’s progress but pushed it back towards $3,100 per ounce. Then, as the Fed chief, Jerome Powell refused to lower interest rates as anticipated by most and as willed by the US president things reached a stalemate of sorts. Powell’s premise was that the uncertainty over higher tariffs could fuel higher inflation and therefore it was not the right time to lower interest rates. He felt and still feels that one needs to wait and watch the impact of tariffs on all parameters of the economy before taking the step. To summarise, gold hunted with Trump to set off a spectacular bull-run. However, Powell’s stand on interest rates caused gold to scamper back against the run of play.

On the other hand, Trump is impatient and wants rate cuts immediately. There is a stalemate between Trump and Powell for the past few months. The US president has tried to cajole, reason, threaten and even making it clear to Powell that he wants Powell to either quit or bend to his view point. He has even raised issues on the Fed’s $2.5 billion renovation and its cost overrun. The Fed chief has not only refused to quit and also saying that he cannot be sacked but holding on to his no immediate rate cut policy. However, he has given indications that there could be at least 2-3 rate cuts in the remainder of the year. Therefore, Jerome Powell’s last Jackson Hole speech (his term as Fed chief is to end by March 2026) was very vital for the trajectory of the US monetary policy till the end of his term as Fed chief and his stance on interest rate cuts.

Before dwelling on that speech it will be interesting to find out as to how some global economic parameters have changed since 22 April 2025. As of the week ended 22 August 2025, gold was in the $3,370-73 per ounce region (London pm fix $ 3,334.25 per ounce), much nearer its all-time high of $3,500 per ounce (intra-day) and way past its lowest for the year of $2,644.60 per ounce that was its opening salvo on 2 January 2025. As a result, gold was up by over 27.5% from the beginning of the year but around 5% lower than the 32% plus it scaled on 22 April 2025.

Likewise, silver’s numbers were quite similar with the white metal opening at $29.405 per ounce with 14-year high of $39.320 per ounce (up by over 33%). The week ended 22 August, silver was at $38.005 per ounce up by around 29.4%, all prices LBMA London fix). Platinum too followed a similar pattern as it opened at its lowest for the year at $911 per ounce. It then rose to its highest at $1,474 per ounce on 18 July 2025 (a rise of over 61%) and closed week ended 22 August at $1,339 per ounce (up by over 46%). Palladium was up by 43% to its highest for the year of $1,304 per ounce from $910 per ounce on 2 January while it closed on the week ended 22 August at 1,124 per ounce (up by around 23%).

Looking outside the precious metals basket, one finds that Bitcoins were quite volatile and actually fell by nearly 47% to 74436 on 7 April from the start of Trump’s presidency when bitcoins were around 109114. But, then aided and pushed by the US president bitcoins jumped to 124457 by August 14, 2025 up by 67% from the April 7, 2025 level. For, the week ended on 22 August Bitcoins were only marginally below its 52-week high. Thus, moving ahead to be poised to take over as an alternative to gold as well as the USD. The USD index has been under pressure during the Trump presidency so far. After being around 107.98 on 20 January 2025 it briefly rose to 109.88 on 3 February 2025. But, thereafter it declined steadily to 96.38 by 1 July. It then recovered slightly to 97.73 on 22 August. Does that indicate the impact of de-dollarisation?

However, at the same time the Dow scaled its 52-week high of 45,757.84 on 22 August itself before closing marginally lower at 45,631.74. The much volatile Dow was at its 52-week low of 36611.78 on 4 July. Probably, Dow’s travails reflect on the ebbs and troughs during this presidency till now. One of the key indicators of the state of the US economy was not very promising during the Trump presidency. The US GDP growth was 2.8% for 2024. In the first quarter of 2025, GDP growth rate was barely in the positive at 0.5%. However, in the second quarter the growth rate was 3%, but consumer spending was still slow. For the year 2025 the growth rate is predicted to be 1.9%. All of the above further underlines the importance of Powell’s Jackson Hole speech.

So, what did Powell spell out in his Jackson Hole speech? For once, the Fed chief, Jerome Powell stopped just short of announcing a rate cut in next month’s Fed meeting. This was the closest that Powell has appeared to accede Trump’s long standing persistent demand for rate cuts. However, nothing is set in stone as yet. What Powell said was that there was an upside risk for inflation and downside risk for the labour market. He emphasised about slowing of the labour market and the risk of higher borrowing costs impacting the jobs market. This indication towards a September rate cut caused the US stocks and bonds to soar higher.

However, he also underlined the threat of higher inflation caused by higher tariffs, not just one-time as some suggest but, a more persistently high inflation. With inflation at 2.7%, higher than the Fed target of 2%, Powell said it was a tough balancing act to follow. He asserted that his main job was inflation and unemployment. He further scored his point that to meet such challenges and withstand pressures of all types that policymakers like the Fed are required to be independent. His remark drew applause from all central bankers and monetary policy makers worldwide and caused the euro to increase by 1% against the USD. The bottom-line is that any drastic change in crucial economic data on inflation or the labour in early September could well postpone the possibility of immediate interest rate cut in September.

Meanwhile, the Indian gems and jewellery industry is reeling under the 50% tariff imposed on all Indian exports by the US, currently 25%, but slated to be 50% from 27 August. The gem and jewellery sector is particularly impacted due to the fact that 30% of its exports, more than $10 billion, have USA as its destination. For, USA is the largest consumer of jewellery, mainly studded, in the world. There will be pain for the industry, both in terms of job losses and steep decline revenue. However, what must be remembered is that India is the global hub of diamond processing accounting for more than 90% of cut and polished diamonds in the world in volume terms (carats) and around 80-85% in value terms. These huge capacities cannot be replicated elsewhere in a short period of a year or so, nor is the expertise processing small diamonds easily available anywhere else in the world. We have seen the efforts made by diamond mining countries and others trying to cut and polish diamonds locally. Most of these efforts have not borne the expected success. For, neither have they had the skills nor is it feasible for them to make it economically viable. The global industry’s dependence on India’s cut & polished diamonds cannot be wished away by anybody’s whims or fancies. As far as plain gold or silver jewellery is concerned, India has a few export destinations that can be revived quite easily by its resourceful players.

Finally, gold is fending off bears by not slipping below $3,100 per ounce since it scaled $3,500 per ounce. At the same time, gold has been able to keep the bulls in play by foraying above $3,400 per ounce and even approaching $3,450 per ounce from time to time. After having hunted successfully with hounds to scale the latest all-time peak of $3,500 per ounce, gold is striving to ward off the same hounds from pushing it down its lofty highs. If  rate cuts are stalled again and continue till the end of Powell’s tenure as Fed chief till March 2026, then gold would be back to warding of bears and keeping the gold bulls interested and stay in the $3,300-3,400 per ounce region. However, a combination of disruption due to tariffs and a regime of interest cuts could send gold soaring towards starry heights once again.