Gold’s Response to a Trade War

It’s no secret that gold is revered as a safe-haven asset in society today. As such, it thrives in times of economic uncertainty, particularly wars between major economic powers. This is because gold is considered ‘hard money’. Whilst poor as a currency due to the bulkiness of physical gold, the US dollar thrived with a gold backing, though it was unsustainable with the spending pressures of a military-industrial complex.

Wars mean fiscal deficits. In today’s fiat financial system, this overspending essentially leads to a devaluation of a currency as the money supply increases to pay for the war.

Since the official end of the gold standard in 1971, there have been plenty of historical examples of inflationary pressures and fear of moving into gold.

*1971 the end of the gold standard | **the first floating rate after the Nixon shock | *** Recent milestone gold has priced close to

Gold’s Price Suppression

The perfect storm

Despite performing strongly recently, and even during years of conflict, it is widely understood that for many years, central banks and financial institutions have been manipulating the gold price and artificially keeping the price of gold low, perhaps to try to protect the intrinsic value of fiat currencies.

Notable examples of this:

• JPMorgan Chase – Spoofing Scandal (2008–2016):

Traders at JPMorgan were found to have “spoofed” the precious metals markets (including gold) by placing large orders they had no intention of executing, to manipulate market prices. In 2020, JPMorgan agreed to pay $920 million to settle charges from the U.S. Department of Justice (DOJ), CFTC, and SEC.

• Deutsche Bank – Price Fixing Settlement (2011–2013):

Deutsche Bank admitted to participating in the manipulation of gold and silver prices, colluding with other banks. Outcome: Settled in 2016 and agreed to pay $60 million in a class-action lawsuit. Internal chats were released showing explicit intent to rig prices. With one trader saying, “Let’s go smash it”.

• Gold Leasing & “Paper Gold” Market Expansion (1990s–2000s):

Western central banks, including the Bank of England and the Swiss National Bank, leased large amounts of gold to bullion banks, which sold it into the market, artificially inflating supply and suppressing prices. This helped create a vast “paper gold” market disconnected from physical demand, undermining real price discovery. Sounds familiar?

A key example was the Bank of England’s controversial gold sale from 1999 to 2002, where 395 tons were sold at around $275/oz under Chancellor Gordon Brown, widely seen as a price-suppressive move.

Breaking Free from Price Controls

The Leash is Off

With a conscious effort to suppress the gold price from major players, why have we seen a historic rally in the last 2 years, seeing the price of gold double? Simply, central banks have either been limited in the amount of gold they could legally sell (the Washington Agreement on Gold, 1999). Major players now realise they probably can’t get away with market manipulations in the light of major fines for big players. But more prominently in the light of global conflicts in Russia and the Middle East, and now the huge economic uncertainties provided by President Trump since January, the demand for gold is just that great. Central Banks have been purchasing record amounts of gold. Retail purchasers are finding large premiums on physical bars, signalling a disconnect between paper and physical gold, but also just high demand.

The China–US Trade War

Propelling Gold to New Heights

Trump’s tariffs on China aren’t new. He famously introduced fairly bold tariffs in his first presidential term. This time round, it seems he is doing ‘what he wants’ and trusts his own decisions more so. It’s probably fair to say that Trump wants China to lower their own tariffs on the USA, hence introducing reciprocal tariffs. The issue is that China has failed to lower or remove tariffs and has actually taken offence and as such has begun a blow-for-blow move with both nations increasing tariff rates to seemingly never-ending highs.

This is causing panic within the US markets because so many key items for US companies are manufactured in China and imported into the USA. Ranging from computer chips harming US Tech, or precious metals impacting manufacturing within the US. Trump believes that US manufacturing and supply chains can return to the US, reducing the need for Chinese imports. The fact is, whilst true, this will take time, and it seems Trump is prepared for short-term pain for long-term gain.

Key Events

• February 1, 2025: The U.S. imposes a 10% baseline tariff on all Chinese imports, citing national security concerns related to the fentanyl crisis. ​
• February 4, 2025: China retaliates with a 15% tariff on U.S. coal and liquefied natural gas, and a 10% tariff on crude oil, agricultural machinery, and large vehicles.
• March 3, 2025: The U.S. increases tariffs on Chinese imports by an additional 10%, bringing the total to 20%. ​
• March 4, 2025: China responds with a 15% tariff on U.S. chicken, wheat, corn, and cotton, and a 10% tariff on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products, effective March 10. ​
• April 2, 2025: The U.S. imposes an additional 34% tariff on Chinese imports, resulting in a total effective rate of 54%. ​
• April 4, 2025: China announces a 34% tariff on all U.S. goods, effective April 10. ​
• April 9, 2025: China imposes an 84% tariff on U.S. goods. The U.S. then raises tariffs on Chinese goods to 125%.
• April 10, 2025: The U.S. clarifies that the tariff rate on Chinese goods has risen to 145%.
• April 11, 2025: China increases tariffs on all American imports from 84% to 125%, effective April 12.

The U.S. announces exemptions for certain consumer electronics from the new tariffs but maintains a 20% tariff on electronics imported from China.

Is the Trade War Driving Gold to New Highs?

A Geopolitical Catalyst?

Whilst gold has been on a monumental run before the trade war began, the new catalyst has propelled gold significantly further in recent times than was thought possible.

The reality is that with neither side blinking, and two major economies (and egos) trying to outdo one another, no one really knows if this blow-for-blow will end anytime soon, as a result, with US industries taking the brunt, at least initially. Investors are driving into the safe-haven of gold, further propelling the already high demand.

On top of this, part of Trump’s move with tariffs is eventually making exports cheaper for foreign countries to buy from the US, as reciprocal tariffs prompt the removal of them in their entirety. Furthermore, Trump is notoriously keen on weakening the dollar, a move which will make exports even cheaper.

Economically, should a currency weaken, all assets are retrospectively worth more in that currency, even if their intrinsic value is essentially the same. Therefore, with no change to demand for gold, you would also see the price of gold rise should the dollar continue to weaken.

Conclusion

Gold’s explosive rise in recent years is no coincidence. As global tensions rise and economic certainty fades, gold has re-emerged not only as a safe-haven asset but as a signal of deep systemic strain. From suppressed pricing through coordinated manipulation to breaking free amid record demand, gold has defied decades of fiscal engineering.

The U.S.–China trade war, coupled with a politically motivated push to weaken the dollar, is only accelerating this trend. With central banks stockpiling and investors seeking shelter, the question isn’t whether gold will remain strong—it’s how high it can go in a world that’s rapidly losing faith in a fiat-based financial system.