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Gold
USD
Fed

Trading Gold: Navigating the Tariff Storm and Market Volatility

Chris Weston
Chris Weston
Head of Research
Mar 25, 2025
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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.
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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.

The Bull Case for a Break to new All-time Highs

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.

The Fed’s Policy Stance Offers Tailwinds for Gold

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 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.

Headwinds to the Gold Market

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.

Of course, should risky markets (such as equity) rally on a favourable tariff outlook then gold would likely trade lower.

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.

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

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Margin trading products are complex instruments and come with a high risk of losing money rapidly due to leverage. 84% of retail investor accounts lose money when trading on margin with this provider. You should consider whether you understand how margin trading works and whether you can afford to take the high risk of losing your money. You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your personal objectives, financial circumstances, or needs. Please read our PSF, RDN and other legal documents and ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice.

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