Gold will stay firm as trust in US frays amid Trump’s tariffs and ‘big, beautiful Bill’

SINGAPORE – Gold has retreated from recent record highs, but it still shines bright for investors and central banks rattled by uncertainty over US tariffs and other risks, say analysts.

Gold’s longstanding appeal as a safe haven remains as strong as ever, not just among investors looking to protect their portfolios, but also with central banks facing a more turbulent world.

Buoyant demand for gold in Singapore mirrors the global view. Total bar and coin demand in the three months to the end of March shot up 35 per cent over the same period in 2024, marking the strongest quarter on record, said the World Gold Council (WGC).

Mr Shaokai Fan, head of Asia-Pacific (ex-China) and global head of central banks at the WGC, said: “Gold, a traditional safe haven asset, continues to perform strongly with global demand reaching its highest first-quarter level since the first quarter of 2016.”

Unsurprisingly, recent record prices have dampened affordability. Jewellery sales volume here fell 20 per cent in the first quarter of 2025 compared with a year earlier, while the value rose 9 per cent year on year. 

US President Donald Trump’s “Liberation Day” tariffs on major trading partners on April 2 jolted gold prices from below US$3,000 an ounce to almost US$3,500 by late April. Gold then took a beating in May following the de-escalation of the tariff war between US and China, with prices now hovering around US$3,300 an ounce.

Mr Heng Koon How, head of markets strategy at UOB, expects a near-term consolidation in prices after the sharp rally.

UOB is still seeing strong demand for gold, especially from central banks in emerging markets and Asia, but Mr Heng expects the pace of stockpiling to be less intense than earlier in 2025 because the 10 per cent universal tariffs the US charges as a baseline remain in place. 

He is keeping his gold price forecast for the third quarter at US$3,400 an ounce, and for the fourth quarter at US$3,500 an ounce.

Ms Lina Thomas, a commodities strategist at Goldman Sachs Research, predicts gold will rise to US$3,700 an ounce by the end of 2025. She noted that investors have been increasing their holdings since March on concerns about the health of the US economy and market volatility.

Central banks, which own about 17 per cent of all the gold ever mined, typically buy the metal for portfolio diversification, risk management, inflation hedging and protection against geopolitical and market volatility.

Emerging-market central banks have been boosting their gold holdings as they play catch-up with their peers in developed markets, Ms Thomas added. 

China holds less than 10 per cent of its reserves in gold, compared with about 70 per cent or more for the US, Germany, France and Italy. 

Russia’s invasion of Ukraine in 2022, and the freezing of Russia’s foreign assets by Western countries, marked a turning point for central banks’ stance on gold.

Their purchases on the London over-the-counter market have since increased fivefold, said Ms Thomas.

Much also remains unsettled as the world’s trust in the US has been rattled by unpredictable policy announcements and a return of recessionary fears even as Mr Trump’s “big, beautiful Bill” passed the House of Representatives and now awaits the Senate, economists said. 

The Bill will make permanent huge tax cuts for the wealthy and cost the government US$4.6 trillion (S$5.9 trillion) over the next 10 years, they added.

If approved, the sweeping tax and spending Bill would increase the US deficit to about 125 per cent of the economy’s output, which in turn could hobble America with economic problems and financial risks if the tariff plan does not pan out.

Goldman Sachs is recommending a higher-than-usual allocation to gold, as a critical hedge against inflation shocks that tend to hurt bond and equity products. 

If concerns about the US fiscal position and Federal Reserve’s independence intensify, a flight to gold could drive prices beyond US$3,700 an ounce by the end of 2025, the investment bank said.

While central bank purchases have been the primary factor driving up gold prices in recent years, growing exchange-traded fund (ETF) holdings are also beginning to feed into the mix. 

WGC senior markets analyst Louise Street noted that investors have been piling into gold ETFs from the third quarter of 2024. Inflows in Asia in April 2025 stormed past their 2025 first-quarter total. 

She believes there could still be room for further growth, with global gold ETF holdings sitting 10 per cent below their 2020 high.

“Looking ahead, the broader economic landscape remains difficult to predict, and that uncertainty could provide upside potential for gold,” Ms Street said.

“As turbulent times persist, safe haven demand for gold from institutions, individuals and the official sector could climb higher in the months to come.”