Gold is in the midst of a historic more than 120-per-cent run-up that epitomizes its investment case in 2025 and over your investment lifetime as a vehicle for capital appreciation, inflation hedging and protection against macroeconomic and geopolitical uncertainty.
The yellow metal began its ongoing ascent at around US$1,300 per ounce in 2018 amid U.S. recessionary fears and President Donald Trump’s trade war with China. It then went on to surpass the US$2,000 mark just after the COVID-pandemic in 2020, supported by a surge in stimulus funds and ensuing inflation stemming from the end of global lockdowns.
Jolted by Russia’s invasion of Ukraine in 2022, the beginning of the Israel-Hamas War in 2023, and hawkish global monetary policy, gold climbed even higher, reaching and besting all-time-highs along the way to its most recent milestone of US$2,953 per ounce on February 21, 2025, propelled by renewed inflationary fears surrounding Trump’s tariffs against Canada, China and Mexico.
Comparable only to its de-pegging from the dollar in the 1970s, and its growth between the 2001 Dot Com Crash and 2008 Global Financial Crisis, the continuation of gold’s momentous run is contingent on numerous political and economic pressures that should inform an investment, whether current or under consideration.
Trump tariffs
On February 1, 2025, President Trump signed an order to impose 25 per cent tariffs on imports from Canada and Mexico and a 10 per cent tariff on China because of, among other things, perceived unfairness in the arena of global trade. The move represents US$1.3 trillion or nearly half of all U.S. imports, much of which will need to find a more favorable route in the supply chain. Retaliatory tariffs from Canada and China are in effect, representing goods valued in the hundreds of billions of dollars.
While the tariffs on Canada and Mexico remain on a 30-day pause announced on Feb. 3, their consequences, should they come into effect alongside China, will likely be inflationary, adding fuel to cross-sector growth catalysts like artificial intelligence and the energy transition, and potentially tipping all parties involved, including the U.S., into a recession. Canada and Mexico represent over 70 per cent of crude imports to U.S. refineries, more than 60 per cent of all vegetable and nearly half of all fruit and nut imports, to name just a few, increasing scarcity and setting the stage for gold to outperform in a rising-price environment. The price per ounce reflects this thesis, adding 4.2 per cent from Feb. 1 to Feb. 21.
Whatever the outcome, China and the U.S. retain the upper hand, with their economies relying on trade for only 37 and 25 per cent of their GDPs, respectively, compared to Canada and Mexico’s 70 per cent, according to the Council on Foreign Relations, which envisions that affected currencies will weaken to cushion the impact on export prices, further stoking demand for gold as a diversifier for value preservation.
Dollar devaluation
With U.S. House Republicans considering a tax and spending bill that would add up to US$5.5 trillion to the national deficit and increase interest costs by US$1.3 trillion over the next 10 years, according to the Committee for a Responsible Fiscal Budget, gold is poised to rise, as it has moved in sync with the U.S. deficit reliably across history.
Furthermore, should U.S. debt increase from its current 99 per cent of GDP to 172 per cent by 2054, as estimated in the latest congressional Budget Office projections, the attractiveness of the U.S. dollar as the world’s reserve currency would dwindle.
Rising U.S. debt, coupled with fallout from dollar weaponization against Russia, and fears of increased government instability with Trump’s election, are already prompting numerous countries to lose faith in the U.S. economy and diversify their reserves away from the dollar into gold.
This trend is highlighted by multiple years of strong gold purchases by major central banks, spearheading the way towards record 2024 demand, as well as a telling note by economist Brad Setser showing how China, the world’s second-largest economy after the U.S., has cut investments in U.S. financial assets as a share of GDP down to a level last seen when it joined the World Trade Organization in 2001.
Geopolitical tension
It is essential to remember that gold is thousands of years into its value preservation track record, with the price per ounce rising by over 4,200 per cent since 1973, according to GoldPrice.org, remaining resilient through dozens of wars, recessions and black swan events.
Gold has continued to outperform during the world’s ongoing deglobalization trend marked by Trump’s America-First policies, growing European nationalist sentiment, tensions in the South China Sea and an increasing shift towards onshoring, not to forget the numerous other conflicts unfolding across the world in Sudan, Israel-Palestine and Syria, among many others.
As deglobalization constricts supply chains and hinders growth, the stock market will feel the added pressure, compounded by still-high interest rates, increasing gold’s appeal as a return driver that has excelled over the long-term, with an emphasis on periods of high economic uncertainty.
The key question for investors becomes, how is gold positioned to perform in 2025 based on the macroeconomic backdrop discussed above? Look out for Part 2 next week for a full breakdown.
This is sponsored content issued on behalf of Border Gold Corp., a leading Canadian gold and silver dealer, please see full disclaimer here.
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(Top image, generated by AI: Adobe Stock)
