Trading Gold; The risk for gold heading into a tariff storm

26 Mart 2025

Today’s market analysis on behalf of Chris Weston Head of Research at Pepperstone

Gold remains not just the best-performing asset class in 2025 – certainly on a risk-adjusted basis – but is also the more obvious buy-on-dips play from investment managers and swing CFD traders.

Technically, some of the heat has come out of the recent gold rally into $3057, but for now the gold price holds above the 5-day moving average, with buyers stepping in on moves into $3000, where the big figure remains the near-term line in the sand. A break of $3000 could take us into $2956 (the 24 Feb highs) and subsequently increase the prospect of profit-taking and selling from systematic-momentum accounts.

The degree of support into minor pullbacks has frustrated tactical leveraged traders who see positioning as overly rich and the move extended to the point that the risk to reward is clearly skewed lower – a view also shared by options traders, where we see gold 1-week put implied volatility trading at a 0.67 vol premium to call volatility, portraying that if gold was to have a move (over the week) it would likely be more pronounced to the downside than the upside.

Making the bullish case for a break of the all-time highs of $3057 involves Trump reversing his recent softened stance on the countries set for tariff exclusions and bringing out the big guns on the “Dirty 15” nations – a factor which would perpetuate the uncertainty in markets, and the business community and see market pricing of implied Fed rate cuts increase. It would also promote a new leg lower in US 2-year real Treasury yields and a steeper Treasury yield curve as the perceived US recession risk over the coming 12 months pushes towards 50%.

This gold-positive scenario is certainly not out of the realms of possibility, as the headline risk and the noise in markets set to impact us all over the coming month(s) will be all-encompassing, to the point that tariff headline fatigue, if one is already feeling it, will almost certainly hit hard.

I would also argue that the Fed’s current stance on policy is modestly supportive of the gold market. Granted, the Fed have stepped away from a defined and explicit dovish tone, and some have questioned whether the ‘Fed put’ has been pulled altogether – however, having already cut the fed funds rate by 100bp, and signalled (in the recent set of ‘dots’) that a further 50bp is yet to come by year-end , 150bp of cumulative cuts when US core PCE is forecast to lift to 2.8% (by December) is hardly the actions of a central bank hellbent of bring inflation to target. It clearly highlights the level of concern they have on downside risks to growth – another clear consideration as to why money managers have weighed into gold as a hedge against economic fragility.

In fact, should the Fed turn more hawkish, and certainly because of rising right-tail inflation risks, then this could be a strong positive for gold, as traders price the higher prospect of stagflation and a central bank less able to support demand and fragility in the labour market.

Central bank buying has also been a major tailwind for gold, but the data here is not reported real-time, so is a hard one for traders to factor into their daily process. What’s is clear is that inflows into gold ETF funds, and notably the GLD ETF, have been a new source of support for the gold market and helpful in supporting spot gold above $3000. This was a case in point on Friday with $1.95b of inflows into the GLD ETF, the second-highest level ever.

Some have pointed to the rapid decline of Indian imports (of gold) and a degree of reduced buying from end users (jewelers) and consider that the record prices are playing into the elasticity of demand. With several gold miners having recently removed their gold hedges, and gold futures positioning still at elevated levels, one could argue these dynamics do limit the upside case for gold and suggest if gold does move towards $3057 that the price action would be a grind, rather than an impulsive rally high, backed by aggressive range expansion.

As we head into the eye of the tariff storm, an open mind on future price action and direction will serve any trader well, as gold will often break away from classic correlations and do what it wants to do… for now, pullbacks remain supported and the reasons for owning gold haven’t gone away.

 

Zaid Barem / ymm