If there’s one thing market participants don’t like, it’s uncertainty.
But that’s just what there’s plenty of at the moment, given the unclear outlook for the global economy because of a potential full-blown trade war, or for the U.S. economy amid mass federal layoffs.
In response to abrupt moves by the administration of President Donald Trump, investors have been selling equities, sending the S&P 500 down 4.5% so far in 2025. They’ve also been selling the U.S. dollar, with the greenback measured against a basket of other currencies in the ICE U.S. Dollar Index dropping by a similar amount.
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At the same time, they’ve been turning to an old standby of perceived safety — gold.
The market jitters have helped send the precious metal above $3,000 an ounce for the first time, and that can tell us a lot about where investors’ heads are at, even if it doesn’t provide a crystal ball about what the future will bring.
“The present administration did sweeping federal cuts and started leveraging taxing powers against foreign trade partners in a rather quick fashion,” says John Gillet, CEO of Gillet Agency, a financial planning company in Florida. “Investors are experiencing a bit of whiplash from the wave of events.”
In addition to general economic, political and social uncertainty, people appear to be buying gold because it got over a big round number that added to its momentum, says Brett Friedman, managing partner with risk management advisory Winhall Risk Analytics.
“Once over, investors can begin to experience FOMO, even though the fundamentals are basically the same as they were a few weeks to months ago,” Friedman says.
If you’re experiencing the fear of missing out with the gold rally, here are some things to consider:
— Gold as a safe haven.
— Gold as a dollar hedge.
— Reverberations from the war in Ukraine.
— Gold buying by retail investors.
Gold as a Safe Haven
Ultimately, because gold doesn’t earn interest or pay dividends, investing in it really isn’t about making lots of money like you might if you own a high-growth stock. Rather, gold is more of a store of value over very long periods of time, even though it can be quite volatile in the short term.
“History shows that economic models change, currencies depreciate and companies disappear, but gold has been retaining its value for thousands of years,” says Julia Khandoshko, CEO of European broker Mind Money. “Its appeal isn’t so much about generating returns as it is about preserving capital when few other options feel reliable.”
As global tensions mount over trade even as the wars in Ukraine and Gaza continue and relations between China and the U.S. remain strained, investors have been searching for something they feel is sturdy.
“Gold is currently doing what it has historically done best, by providing certainty in a sea of uncertainty,” says William Stack, owner of financial planning consultancy Stack Financial Services. “With the world’s reserve currency economy facing unsustainable debts and deficits, and increased difficulty in raising capital via bond sales, gold offers protection from decreasing currency values.”
Gold as a Dollar Hedge
Because there is a finite supply of gold, with new supply controlled by mining companies that are finding ever fewer major deposits, gold has a value that is constrained, unlike paper money backed by governments that can use policy (and the money printer) to help control a currency’s value.
In addition to its supply and demand fundamentals, gold is often priced in U.S. dollars on international markets. That means it tends to move inversely with the greenback because a weaker buck means it takes a larger dollar amount to buy the same amount of gold.
“Gold is serving as a hedge against the dollar and other currencies losing their purchasing power,” says Chris Mancini, associate portfolio manager of the Gabelli Gold Fund (ticker: GOLDX). “Tariffs might accelerate this process as the prices of goods across the world increase.”
Big spending by the U.S. government has long been a worry of many gold holders who buy the metal as a hedge against declines in the value of the U.S. dollar.
More recently, a looming trade war is also raising fears about inflation as nations increase tariffs, or taxes on imports that are ultimately paid by the end consumers.
“President Trump’s tariff threats and foreign policy maneuvers have kept people guessing and raised uncertainty,” says Stephen Mullowney, CEO of miner TRX Gold Corp. (TRX). “Will the bite be as loud as the bark? That’s currently unknown.”
Reverberations From the War in Ukraine
A key pillar of support in recent years has come from central bank buying. These institutions have been buying gold in record amounts after the U.S. used the international banking system, which is denominated in greenbacks, in early 2022 to freeze the assets of Russia after its invasion of Ukraine.
In each year from 2022 through 2024, central banks have bought more than a thousand metric tons of gold annually, with 2024 seeing record purchases of nearly 1,045 metric tons, according to statistics compiled by the World Gold Council trade group. That compares to the 473-metric-ton annual average from 2010 to 2021.
“Central banks have been acting like a base load of demand,” Mancini says. “They are buying because Russia’s U.S. dollar- and euro-denominated reserves were confiscated after it invaded Ukraine. Other central banks are now worried that that might happen to them and are selling dollar-denominated bonds to buy gold, a physical asset which can’t be digitally confiscated.”
But there are other tensions around the world, too.
“With the sanctions regime on Russia and the increasing hostilities between the West and China, countries are afraid they may stoke the ire of the West, are less inclined to keep their reserves denominated in dollars and are turning to assets to replace capital that would have otherwise gone into the Treasury markets,” says John Berman, chief investment officer at natural resources investment management company Berman Capital Group.
Gold Buying by Retail Investors
It’s not just central banks buying gold. Retail-level investors as well as professionals have also been involved, many of whom also want to diversify away from U.S. dollars.
They fear inflation and worry that the U.S. dollar will lose value amid massive government spending and, more recently, that a tariff war will prove inflationary as nations around the world raise the price of imports in reaction to the Trump administration’s trade policy.
While China’s central bank has been buying gold, so have retail-level consumers in the Asian nation.
“Gold is trading higher as Chinese consumers buy because of declining real estate prices and negative real interest rates,” Mancini says. “Also, western investors are starting to buy through ETF purchases as a hedge against economic disruption or inflation caused by tariffs.”
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$3,000 Gold Price: What It Says About Expectations for the Economy originally appeared on usnews.com
Update 03/19/25: This story was published at an earlier date and has been updated with new information.
