By Jim Luke, commodities fund manager at Schroders
Gold prices have been in the headlines recently given the precious metal’s long-held status as a safe-haven asset that investors rush to in times of crisis and volatility. Its prominence following long-running global geopolitical and fiscal trends that have accelerated since “Liberation Day” could be set to continue.
Geopolitically, the world has been moving from a globalising “Washington consensus” towards a multi-polar world and great power rivalries for some time.
Fiscally, very high national debts and increasingly untenable domestic deficits are a potent cocktail that history tells us usually ends in currency debasement, inflation and fiscal dominance.
These trends already held the potential to create a situation where multiple pockets of global capital attempt to acquire gold, as a safe monetary metal, simultaneously.
The gold market is simply not large enough to absorb such a simultaneous global bid without much higher prices. But President Trump is super-charging the potential for that simultaneous global bid.
Cyclically stagflationary, structurally seismic
Trump’s protectionist agenda is most likely stagflationary. Our analysis shows the impact of Liberation Day tariffs on US inflation at 2%, with a hit to growth of almost 1%, before accounting for any retaliatory tariffs. Stagflation can be painful for risk assets but tends to be very supportive for gold.
The bigger picture is potentially much more seismic. By proposing heavy tariffs based on the size of deficits and not actual trade barriers, Trump is making it clear that the US wants balanced trade, not free trade.
This rejection of deficits is the starkest rejection yet of globalisation but also can be seen as a de-facto rejection of the US dollar-centric global monetary regime that the global economy has lived under since the end of Bretton Woods in 1971.
Since the end of Bretton Woods, the US dollar has acted as the primary global reserve currency, dominating official reserves and dominating international trade and finance, far beyond the US’ share of global GDP. It has underpinned an open and rules based global trading system, complemented by steadfast geopolitical alliances.
One of the largest effects of this dollar standard status quo has been the recycling of dollar revenue into US dollar assets, mainly US Treasuries, which are seen as safe assets and the bedrock of the global financial system.
Foreign holdings of US equity and private credit assets are also enormous. This cumulative flow now leaves the US with a net international investment position of a negative $26trn, as Trump himself quoted in his 2 April address.
It’s not difficult to see that the current tariff-based assault on the global trading system might, in turn, lead to significant repatriation flows amid a questioning of just how safe dollar assets now are or how bright the relative US economic outlook is.
With such a dearth of credible alternatives, gold could expect to be a major beneficiary of such a repatriation trend.
How high could gold go?
Since finally breaking out in early 2024, gold prices have rallied by over $1,000 an ounce. Gold has had a particularly good run recently through the first quarter of 2025, with prices reaching $3,200 an ounce in early April.
In a scenario where already strong central bank demand is joined by strong global investment demand, gold prices could easily move much higher to generate the increase in recycled supply and destruction of jewellery demand necessary to balance the market.
Despite this, mine supply won’t be able to respond quickly even at much higher prices. Prices are already at record highs but mine supply is basically flat on 2018 levels.
All things considered, gold at $5,000 an ounce by the end of the decade did not feel outlandish twelve months ago. It feels frankly conservative now.
Fundamentally, this is because gold is rallying as a monetary asset, not as a commodity asset.
This recasting of gold as a monetary, rather than a commodity, asset – exacerbated by the events of the past few weeks – offers pause for thought on the long-term future role for gold in the international monetary system, and its potentially enhanced function as the ultimate safe-haven asset.
This article first appeared in our sister publication, Portfolio Adviser.
