The Gold Rush of a Fragmenting World
Gold prices have surged sharply in 2025, breaking past the magical ₹1 lakh mark (for 10 grams) in terms of landed price and approaching all-time highs. While the usual drivers—rate expectations, central bank buying, and geopolitical risks—remain relevant, a key yet underappreciated catalyst this year is the intensifying global tariff environment, especially as the U.S. adopts a more protectionist stance.
This renewed wave of tariffs is creating broad-based uncertainty across global trade, commodities, and currency markets, prompting investors and central banks alike to seek the safety of gold.
1. Rising Tariff Walls Are Reigniting Risk-Off Sentiment
The U.S. has implemented or proposed significant tariff hikes, targeting Chinese goods, strategic technologies, EVs, pharmaceuticals, and even traditional sectors like steel and textiles. India, too, is caught in this widening net of tariff realignment.
For corporates and investors, the message is clear: the world is fragmenting into trade blocs, and the predictability of global commerce is diminishing. In this environment, gold—being outside the fiat, trade, and regulatory system—is an increasingly attractive hedge.
2. Currency Volatility and Inflation Pass-Through from Tariffs
Tariff hikes act as a tax on trade, increasing the landed cost of goods. In many countries, this is being passed through to consumers as imported inflation. Meanwhile, countries with weaker currencies or high import dependence (like India, Indonesia, and parts of Africa) are seeing currency depreciation, which makes gold an even more compelling asset to preserve purchasing power.
The interplay of:
- Rising costs of imports,
- Stretched fiscal deficits (as governments offer subsidies to shield domestic industries), and
- Higher trade imbalances
is putting pressure on fiat currencies. In contrast, gold’s value rises in direct proportion to these stresses, making it a preferred asset class during tariff-induced turbulence.
3. Central Banks Hedge Against Trade and Dollar Risk
Central banks are acutely aware of the growing weaponization of trade and the dollar. In response, they’ve ramped up non-dollar reserve diversification, particularly into gold.
In 2024 and continuing into 2025, central banks collectively added 1,200+ tonnes of gold, with China, Turkey, and India leading the buying spree. This is a structural move—not merely a reaction to inflation or rates, but a strategic hedge against growing Western trade protectionism, secondary sanctions, and geopolitical leverage linked to currencies and trade access. This long-term demand base gives the current gold rally durability and depth, distinct from previous, more sentiment-driven rallies.
4. Gold Is Outperforming Other Safe-Havens Amid Trade Fragmentation
Traditionally, the dollar and U.S. Treasuries serve as global safe havens. However, in an environment where the U.S. is at the epicenter of trade tensions, its safe-haven status is being reassessed by global investors. Investors are rotating into neutral assets like gold, which are not tied to the credit risk, trade policy, or inflationary decisions of any single government.
5. Forward-Looking: The Case for Structural Allocation to Gold
Looking ahead, even if tariffs are dialed back or politically negotiated, the broader environment has shifted. Supply chains are more regionalized, trade is less frictionless, and currency volatility is here to stay.
In this world, gold plays multiple roles:
A hedge against trade volatility and inflation
A buffer against currency depreciation
An apolitical reserve asset for central banks and sovereigns
As tariffs rise and global economic integration reverses, gold is no longer just a crisis hedge—it is becoming a core allocation in a deglobalizing world. The gold rally of 2025 is not just about dovish Fed signals or central bank demand—it is deeply linked to the tectonic shifts in the global trade and tariff regime. As the world edges toward economic nationalism and strategic decoupling, gold offers stability in a system increasingly characterized by fragmentation, uncertainty, and inflationary frictions. The new gold thesis isn’t just about rates—it’s about resilience. Numbers don’t lie.
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