Trump Tariffs Are Bullish for Gold!

Foreign central banks needed no extra push to keep aggressively buying gold. But President Donald Trump’s imposition of sweeping tariffs across the globe all but guarantees that major central banks will accelerate efforts to diversify their holdings away from U.S. dollar assets and buy more gold.

Central banks hold many billions of dollars in U.S. Treasury bills, notes, and bonds, which historically have been seen as a zero-risk investment. No more for foreign governments that have been shocked by the sudden tariffs that threaten to sharply curtail global trade. The policy uncertainty that now clouds relations with Washington creates an incentive to move reserve assets away from the dollar and towards gold. This shift was already underway, after the U.S. froze Russian assets to sanction Moscow for its invasion of Ukraine. Fearing further weaponization of the dollar, Eastern Bloc nations in particular have aggressively purchased gold in the past couple of years to “de-dollarize.”

Bank of America says emerging market central banks may now aim to triple gold holdings to about 30 percent of reserve assets, which would lead them to accumulate 11,000 metric tons of gold.

Central banks have purchased more than 1,000 tons of gold a year since Russia’s 2022 invasion of Ukraine, double the average of the prior decade, and it now appears that pace is likely to increase.