Citing foreign trade and economic policies as a “national emergency”, Donald Trump’s minimum 10 per cent tariff on all countries – along with higher “individualised reciprocal tariffs” for nations with which the US holds a larger trade deficit – continues to disrupt markets in the days following the announcement.
Equity markets had a lot to say about the announcement, with Nasdaq and S&P 500 closing 6 per cent and 4.8 per cent down, respectively.
By Friday lunchtime, the ASX 200 reported losses of some 1.6 per cent, while European and Asian markets were also in the red.
In a statement following the news from the US, Global X investment strategist Justin Lin said the tariffs were worse than expected, as markets were unprepared for the simultaneous implementation of both blanket and reciprocal tariffs from Washington.
“Gold, by comparison, didn’t have a major reaction,” he said.
In fact, gold saw a modest 50 basis point increase in Asian trade following the tariff announcement, reflecting a “better safe than sorry” approach, Lin said, adding that “the overall lack of significant reaction suggests that most of this worst-case scenario has been priced in”.
“Suffice to say, the announcement hasn’t changed gold’s short-term outlook,” Lin said. “Gold could rise to US$3,300 on strong momentum and retail buy-in. But for the next leg of the rally, investors must watch how the affected countries react.”
Turning to gold flows, Lin pointed out that flows in Q1 2025 show a much stronger investor reaction to the current tariff situation compared to previous rounds, with US$12 billion in exchange-traded fund (ETF) inflows this quarter, compared to just US$5 billion in Q4 2018.
However, he noted, “if you observe the timeline of purchases by tonnage, the buying we’ve seen in Q1 2025 instead closely resembles that of Q4 2018 when tariffs first kicked off”.
“Investors bought 115 tonnes of gold then, 135 tonnes today. It was only when trade wars escalated in 2019 that investors bought 262 tonnes of gold in Q3 of 2019. For reference, if that volume of purchase transpires today, that would represent almost 30 billion of inflows into global gold ETFs,” Lin said.
Bendigo Bank’s chief economist, David Robertson, similarly pointed to gold as a “star performer” in the aftermath of Liberation Day.
“Amid all this uncertainty, volatility on financial markets is high, but the star performer on the markets has been the safe haven of gold,” Robertson said.
Others, too, have pointed to gold as the rare asset that is safe from escalating trade tensions.
In a recent market update, VanEck APAC managing director Arian Neiron highlighted a shift in market sentiment from idealism to hyper-realism, noting that uncertainty will likely prevail in the near term, with Australia not immune.
In this environment, he emphasised diversification remains a key strategy, adding that gold should continue to thrive amid the Trump administration’s policy-induced uncertainty.
In fact, he suggested, foreign currency depreciations triggered by tariffs could be a win for gold producers given that a significant portion of their cost base is denominated in local
currencies.
“For example, Alamos Gold estimates that about 90–95 per cent of its Canadian operational costs are Canadian dollar-denominated, while about 40–45 per cent of its Mexican mine expenses are denominated in pesos,” Neiron said.
“While industry cost inflation is widely reported around the 3–5 per cent range for 2025, the potential benefit of weaker local currencies and a rising gold price should more than offset inflationary pressures for the sector. This dynamic is expected to continue to drive margin expansion to new record levels.”
