Author: Evie Soemardi

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Trump Tariffs: Gold Currently the Only Winner

Liberation Day has been declared by President Trump in America and the global fallout has been swift and significant.China has met America and imposed their own 34% retaliatory tariff on all US imports, a move that some analyst fear could lead to a fully-fledged international trade war.With gold trading at $4,957, silver at $50.00, and platinum at $1,519, it is clear what asset class has benefited the most from the confusion and turmoil.

Stock market fallout: statistics to date

Since the Liberation Day executive order was announced, American markets experienced a downward trajectory, however this morning has seen the first signs of recovery across various sectors.  This afternoon the S&P 500 (the broadest benchmark of largest-capitalised companies) experienced an 10% decrease.  Bitcoin is down 6.8%, the NASDAQ (tech stocks) has slumped 8.7%, and silver has been hit the hardest sliding backward by 10.8%.  Gold held its value the best dropping only 4.3%, hence providing the best purchasing power of all asset classes affected by the harsher-than-anticipated tariffs.

Precious metals fared much better in Australian markets due to the USD to AUD exchange rate with the Australian dollar losing value during this time.  Silver dropped 7.1% and gold is down only 0.1%.  Again, those holding precious metals locally will have maintained better purchasing power than their American counterparts.

Below is a graph illustrating how each asset has performed since the Liberation Day speech.

 

Historical precedent: 1987

Many analysts are comparing current events to the crash in late 1987.  This is because graphs from the 1987 Black Monday event are eerily similar to now.  Black Monday is an important historical marker because it highlighted how globalisation, a new concept at the time, impacted the international markets and illustrated how interconnected financial sectors had become.  The events preceding the Black Monday crash included a massively over-valued stock market, persistent US trade and budget deficits, and rising interest rates.  Today America matches the same description except the Federal Reserve interest rate is only 4.33%, whereas it was 6.5% in 1987.  While it appears that the interest rate is lower today, keep in mind that it exists in the context of quantitative easing where the share market is hooked on easy money- hence, 4.33% could be seen as larger burden to bear for the current institutional investors than 6.5% back in the 1980s.  Below is a graph of the S&P 500 at the time of the Black Monday event versus today.

What is important to note about the 1987 Black Monday crash is that the aftermath did not include a recession.  The stock market continued its strong upward trend until the dot-com crash in 2000.  Alternatively, the Great Depression of 1930 saw a severe global economic downturn with a stock market crash that continued through the 1930s that was marked by high unemployment, poverty and business failures at large.  So what is the likelihood of recession in 2025?  Goldman Sachs has raised the odds to 45%. Polymarket, an American betting platform for investors, has the odds at 62%.  If the Federal Reserve does enter a rate cutting cycle as is now anticipated, the probability could grow.  They will not, however, have an early decision with inflation remaining first priority for the Fed.

How does gold and silver behave in a crash?

Gold and silver are subject to macro-economic influences and competes for capital against other asset classes in volatile trading periods as well as in times of economic growth.  The current decline in value is to be expected in all markets, including the precious metals.  This is due to the extreme uncertainty in how things can unfold in relation to trade, investor debt obligations and their ability to close short positions in a falling market, political implications, and on it goes.  Like other assets, precious metals historically decline in value at the beginning of a crash; however, as investors look for safety gold (followed by silver) will decouple and start a new upward trajectory as capital flows into safe-haven assets.  Seasoned investors will see this decline as an opportunity to dollar cost average prior to the value moving back up.

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Trump’s Liberation Day Executive Order Spells Volatility for Precious Metals

President Trump has finally revealed his latest Executive Order branded as part of his “Make America Wealthy Again” campaign.  Chart in hand, he spoke in the White House Rose Garden of a baseline 10% tariff plus any additional reciprocal tariffs applicable to multiple countries.  Both gold and silver whipsawed up and down as he spoke, with both up about half a percent by the end of the speech. With gold trading at $4927, silver at $50.71, and platinum at $1512, the last twenty-four hours has seen volatility in each market.

Tariff turmoil

President Trump did not stop at an additional 10% tariff on every nation in his bid to make America wealthy again.  He also announced reciprocal tariffs that would be imposed in addition to current tariffs that are in place.  For example, China already has a 20% tariff imposed on its exports to the United States.  They now have an additional 34% of reciprocal tariffs assigned to them making the total rate a massive 54%.  Below is a table outlining reciprocal tariffs for countries of interest.

 

Keep in mind that tariffs will also affect the competitive edge for certain items exported to America.  In the instance of Australian wine, the price just increased by 10% for American consumers; however, the price of European wine has increased by 20%.  So while demand may soften in American markets due to higher prices in general, certain products could maintain a competitive edge according to country of origin and the associated tariffs.

Financial fallout

The financial fallout concerning the tariffs will play out over months.  Expect retaliatory tariffs, supply lines to be disrupted and redirected, and a softening in consumer demand to eventuate in response to the “Liberation Day” trade policies.  What is evident now, though, is that it will affect central bank decision making regarding interest rates.  Local analysts are certain that the Reserve Bank of Australia (RBA) will now facilitate up to four rate cuts this year in total (as opposed to two or three prior to Trump’s new executive order).  Indeed the RBA governor, Michele Bullock, has confirmed the board is open to rate cuts as a response to the consequences of tariffs if needed.  Similarly, traders also expect the US Federal Reserve to make three quarter-point reductions by October.  This is significant because of what it implies regarding recession. We have covered this topic in a previous article but to recap, successive rate cutting cycles are often seen as an indicator of a recession to come.  Indeed some analysts have indicated that the likelihood this year is as high as 50% according to institutional banks including Goldman Sachs, JP Morgan and Deutsche Bank, and betting agents alike.

 

The implications for gold and silver in Australian markets

This kind of financial turmoil is always good for safe haven assets such as the US dollar, gold and silver.  For as long as the tariffs are implemented the slowdown in consumer spending world-wide is an obvious outcome while the market adjusts.  A slowdown in China could possibly mean a reduction in the Australian dollar (known as the Commodities Currency).  As the AUD devalues the price of gold and silver increases in the Australian market.  When you combine the impact of a potentially weaker local currency with the global market conditions of financial uncertainty, the likelihood of geopolitical conflict somewhere in the world (take your pick), multiple asset bubbles, and the various debt burdens among institutional bodies and consumers alike, it paints a picture of troubling times and stormy clouds.  The only lining to these clouds is in the form of gold and silver. Protection of assets and wealth, no matter how large or small, requires preparation. Those holding gold and silver will outperform during these times.

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West Gears Up for World Wide War

In an effort to “give EU citizens peace of mind” the European Union (EU) has just asked 450 million people to stockpile seventy-two hours’ worth of emergency stockpiles that are being referred to as “war supplies.”  This is the European backdrop that sees gold and silver hit all-time highs in the Australian market.  Gold currently trades at $4,856, silver at $54.91, and platinum at $1,571, and it seems the global geopolitical climate just increased the possibility of another run on gold and silver, albeit the timing is still in question.

According to the press release issued by the European Union, the reasons cited for such action include growing geopolitical tensions and conflicts, hybrid and cybersecurity threats, foreign information manipulation and interference, climate change, and natural disasters.  Naturally Russia did not escape mention with the EU referring to the full-scale war in Ukraine as one of the reasons.  In making the announcement, representatives of the EU mentioned that luckily they are not starting from scratch and that the Covid 19 Pandemic era was an experience that has already proven the value of “working together in solidarity and coordination within a EU framework [that] makes us more efficient.”  Interpret the EU’s messaging and potential social engineering efforts as you will.

Meanwhile in America, from his International Golf Club in Florida, President Donald Trump announced a series of attacks on Houthi rebels in Yemen.  The airstrikes killed fifty-three people as the President promised to use “overwhelming lethal force” until the Iran-backed rebels cease their attacks on shipping along a vital maritime corridor.  The attacks came a few days after the Houthis said they would resume retaliations on Israeli vessels sailing from Yemen. The Houthis justify their actions based on Israel’s blockade in Gaza.  Moreover, Washington has confirmed that every shot fired by the Houthis will be seen as a shot fired by Iran.  Is Washington preparing its citizens for further, more significant attacks on Iranian infrastructure through this antagonistic rhetoric?

In just days it appears the West has ramped up for a potential global conflict. This is not the first time and history has valuable lessons for those who look.  If we refer to the Iran-Iraq War which started in 1980, there was a sharp spike in the price of gold to the tune of 48.7% in a matter of months as it rose to USD $677.97.  In US Dollars, gold then experienced massive volatility over the next decade and eventually went sideways until the early 2000s.  In this time America conducted two operations against Iran (Operations Ernest Will and Praying Mantis) and experienced high inflation.  Below is a graph illustrating how global conflict is a factor that directly correlates with spikes in gold value.

Conflict in the Middle East, high inflation, and volatile markets- anyone would think we were describing current events, not events from the 1980s.  This time the difference is that a potential war in Europe is also on the cards. Just as the current stock market reflects a bubble in both real estate and tech stocks (read more about this here), multiple regions are shaping up to be the catalyst that could spark global conflict.  The result is a perfect environment to facilitate a major shakedown in the financial world with dire repercussions, one that we may not have seen the likes of for one hundred years.

As the likelihood of geopolitical conflict ramps up, investors are looking to store wealth in safe haven assets such as the American Dollar, gold and silver.  This may be why gold has not yet tested its new support at USD $3,000.  While investors may not be able to affect the probability of war or a financial crash, they can prepare in order to place themselves and their loved ones in the best possible position to deal with such circumstances should they arise.  Investing in gold and silver prior to conflict or financial instability is the best time to ensure wealth protection and even prosperity in a future full of uncertainty.

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Bank Warns Client Base of Potential Stock Market Crash

Both gold and silver have reached new all-time highs with gold trading above US $3000 and silver above $53 for much of the week.  With gold currently trading in local markets at $4,823, silver at $53.28, and platinum at $1,572, precious metal bulls have plenty to celebrate.

Individual analysts have projected the value of gold to be as high as US $4,000 by the end of the year (or AU $6,310 with an exchange rate at 0.6338).  And while we cannot be sure what the figure will be, we are very bullish at Queensland Bullion Company.  Below are new outlooks for gold among some of the major banks:

 

Yet as is usually the case when precious metals perform well, the economic undercurrents make for dangerous waters.  In a private communication Macquarie Bank recently warned its client base of a potential stock market crash in American markets.  They have based this on its analysis of US President Trump’s economic policies.  Further, US Secretary of the Treasury, Scott Bessent (who’s largest position is gold), is on record saying that the Trump Administration is not concerned with market volatility but, like the Federal Reserve, it is focussed on the real economy (not the stock market).  This is despite the fact that the Dow Jones Industrial Average has lost in excess of 7% and the NASDAQ more than 12% in the last thirty days.  This is not great news for the 62% of Americans who are invested in the stock market, so let us take a closer look at the economy where the next global recession will start before it unfolds worldwide.

 

Tariffs

Hot on the press is Trump’s use of tariffs more as a sanction rather than a tax.  While tariffs as a consumer tax is appealing in principle for some people, the reality is that the way Trump has applied them has created much volatility and uncertainty in the markets.  It could be that this is simply a technique to meet certain goals.  Recently threatening 200% tariffs on European alcohol, he has already imposed 25% tariffs on steel and aluminium (this affects Australia).  The 25% tariffs for Canada and Mexico came into effect on March 6, 2025 with a few minor adjustments. Additionally, Trump has also initiated a “Fair and Reciprocal Plan” on trade wherein any country with unfair tariffs or taxes applied against them will see it reciprocated in kind.  The result of such policies could see an economic slowdown as supply chains are disrupted, and retaliatory tariffs and trade restrictions are implemented.  Ultimately, inflation could be the likely end result that will push America closer to recession with some analysts convinced that the likelihood of such for this year is as high as 60%.

 

Real estate

The current state of American real estate is much worse than it was in 2008 at the height of the last boom.  Mortgage applications are down more than 60% (compared to 30% during the GFC).  Housing affordability has reached its lowest in 40 years.  In the early 1970s the average price of a home was 3 times the average median wage; in 2008 it was 4.7 times, and now it is a staggering 6.8 times.  Current prices are 80% above the historical norm, whereas in 2008 it was 35%.  Average days on the market has ballooned out 200% since 2022.  It is increasingly obvious that vendors are requiring to reduce asking prices in order to sell.  Housing construction contract cancellations are on the rise.  Demand has collapsed, sellers have capitulated, forced sales are on the horizon, and when the market collapses by 25% analysts expect that institutions will join the chaos and start selling off massive amounts of stock.  All these market indicators paint a dire picture.  As the world’s best salesman, when President Trump says he will make housing affordable for a single income family again, he has effectively sold the country on the after effects of a major real estate crash.

 

Stocks

The stock market has been covered extensively in a prior article.  To summarise, we remind you that, according to the Stock Market Capitalisation to GDP Ratio, it is currently at 188% meaning that it seems seriously overpriced.  To put this into perspective this ratio was only 106% just prior to the GFC.  Below is a graph showing the difference in investment value had an investor chosen stocks in the NASDAQ 100, as opposed to gold in 2025 alone.

 

Inflation

Our last article established how the US Federal Reserve has lost the war against inflation.  While tariffs threaten to make it worse, it is clear that real estate and stock markets are sectors where inflation is rife.  Consequently, consumer sentiment in America is down 22% since the beginning of the year.  Expect gold and silver to benefit as other asset classes struggle.  Any future consolidation in the price of metals should be seen as an opportunity to buy for investors wanting to enter the market for the first time.  Seasoned investors who have long term goals know it is always better to accrue as capability allows.

 

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The Fed is boxed in while gold and silver look ready to fly.

Overnight gold and silver have experienced a spike in prices worthy of note.  With gold trading at $4,751, silver at $54.01, and platinum at $1,617, volatility seems to be the top concern in the precious metals markets and global economies in general.  While main stream media will emphasis that US President Donald Trump inherited high employment rates, strong GDP growth, low inflation and a soaring stock market, they are quick to dismiss the fact that the Federal Reserve is in a bind with no obvious or effective way to remedy.  Importantly, this bind is one that has been long in the making, independent of which government has held power.

Since the Covid 19 Pandemic America’s monetary base (currency in circulation) is up 60 percent, M2 money supply is up 36 percent in the past four years (cash, checking and savings deposits, etc), and the inflation surge in the same period is cumulatively about 22 percent.  What this means is that too much money has been injected into the American economy since the 2008 Global Financial Crisis (GFC) which has never been addressed.  Adding more money in the system can contribute to rising prices via inflation.  This monetary expansion is now at breaking point and the Federal Reserve has few moves to try and resolve what can no longer be avoided.

Cutting interest rates

When the Fed cuts interest rates it lowers borrowing costs to stimulate the economy.  This is because cutting rates incentivises borrowing via access to easy credit lines.  Consequently institutional investors have not been able to adjust to higher interest rates since the GFC when interest rates were close to zero for ten years straight, and then again for a few years during the Pandemic.  By last year, rates eventually rose to 5.5%.  Because institutional investors are addicted to this easy money, if the Fed does not cut rates it risks an economic slowdown and stock market volatility.  This is why there is a call for a rate cut, regardless of whether it is actually justified.  And while the act of cutting rates is not generally inflationary, it can create inflationary measures which manifest as asset bubbles such as in the real estate, stock, or collectables (eg, art) markets.  Such bubbles tend to burst and this in turn could lead to recession.

Balance sheet manipulation and inflation

While the Fed could be simultaneously cutting rates to stimulate the economy as well as reducing inflation by removing some of the cash in circulation, it is increasingly shy to do so.  And this is where the Fed’s true resolutions become evident.  It has given in to inflation.  To hide this fact the media directs all attention onto the Fed’s rate cutting decisions at each meeting.  In contrast the balance sheet rarely gets a mention; however, it is the state of the assets and liabilities on the balance sheet that dictate how effective rate increases or decreases actually are.  If inflation is not controlled, other instruments can become skewed and somewhat meaningless.

In principal the balance sheet is a list of every asset and liability the Federal Reserve holds.  During periods of quantitative easing, the Fed uses easy money to purchase assets (e.g. Treasury bonds) and therefore inject capital into the market to stimulate the economy.  The result is that for each asset purchased the liabilities grow to equal proportion.  This growing balance is reflective of more money circulating in the economy. Hence, quantitative easing is inflationary by definition.  To put this in perspective, before the GFC the Federal Reserve held assets equivalent to just over US $900 billion.  Just prior to the pandemic era it had ballooned to just under UD $4 trillion.  After the pandemic era, an additional US $5 trillion was introduced putting the balance sheet at US $9 trillion.  Said differently, the Fed effectively circulated an additional US $8 trillion in the economy in fourteen years in an attempt to keep it from collapsing.  This is the ultimate epitome of inflation.

The most effective way to reduce inflation is to decrease the balance sheet by taking money out of the market.  Reducing inflation is the most appropriate way to lower the cost of living for taxpayers.  So in 2022 the Fed started doing just this.  It tightened the balance sheet to the tune of US $1.76 trillion, nowhere near enough to erase the US $5 trillion they injected over Covid.  Below is a graph that tracks the total growth of the Federal Reserve balance sheet since the GFC:

 

As is evidenced in the above graph the recent tightening is far from enough to getting back to pre-pandemic era levels.  While we progressively slide into another recession, there has been little effort to erase the quantitative easing that occurred during the pandemic era let alone the GFC.  By reducing the speed at which it shrinks its balance sheet the Fed is effectively leaving far too much liquidity in the market.  This flies in the face of any attempt to reduce inflation.  But if the Fed tightens the balance sheet too fast, and hence pulls too much liquidity out of the system, it may exacerbate financial instability and could spark a severe correction.  The takeaway is that there is so much liquidity in the economy now trying to reduce it without affecting the market is a near impossibility.  So inflation is going nowhere fast.  The trouble is that if the balance sheet remains high or increases, at some point the market will lose confidence in the Fed being able to meet its debt obligations.  Again, this could lead to market volatility and recession.

In summary, the Fed is now in a no-win situation.  It cannot effectively fight inflation without triggering an economic collapse.  Volatility is likely to be a key feature this year and investors should ready themselves to buy the dip before gold moves higher in response to renewed inflation concerns.  By this stage we all know what this means for gold and silver.  As the preferred instrument to hedge against inflation, economic volatility, and recession, precious metals will be once again tested and be proven out to be real money as it has been for over 5000 years.

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Stocks, Real Estate, and Precious Metals

Even though gold has dipped over the last couple of days, it has continued trading sideways for much of the month and decreased by only $10 from February 10th. This consolidation period is not uncalled for and allows gold to build a more solid foundation for moving forward.  With gold currently trading at $4,625, silver at $50.54, and platinum at $1,530, it could be an opportune time to step back and view two of the fundamentals that support the expected precious metals super cycle that has, essentially, already started.  This article explores the relationship between precious metals and the two main bubbles that are about to burst: stocks and housing.

 

Stock Market

Leading up to the year 2000 a massive stock market frenzy occurred based on internet-related companies, now referred to as the dot-com bubble.  At the time the psychology was that the newly installed internet was the way of the future and investing in related stocks was a sure bet.  The result was significant over-valuation of said stocks, where they increased in value much faster than the rate of monetary expansion at the time.  When assets outpace the organic monetary expansion within an economy, the inevitable result is a correction.  Today we are experiencing the same phenomena in relation to tech stocks, this time related to social media, smart phones, apps, cloud computing, e-commerce, electric cars, and more recently, artificial intelligence, hence the rise of the Magnificent Seven (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla).  The difference is this bubble is comparatively much bigger than the dot-com bubble.  And while tech stocks are a bubble in themselves, the stock market in general also hugely overvalued to the tune of 208%.  Read more about this in our previous article.

What happens to gold and silver when the stock market is overextended? After the dot-com bubble peaked in 2000, it unravelled into a devastating bear market much to the dismay of the investors involved.  The below graph is based on the Dow Jones Industrial Average Index (which is a broader indicator of the stock market than the NASDAQ).  It illustrates not just how quickly the bear market started and ended, but also how gold and silver started a bull run shortly afterward as money was redistributed into everyone’s favourite safe haven assets. From the bottom of the stock bear market to the next peak in gold, it rose about 151% in value in the American market.  Similarly, silver rose 387%. It made more gains and also fell faster than gold, which speaks to one of the fundamental differences between the two metals.

Real Estate Market

The average real estate retail investor would interpret the current market by its extreme unaffordability in the present moment.  Locally, based on a median income household earning of $112,000 those looking to purchase a property can only afford 14% of what the market offers.  This figure has plummeted from 43% four years ago, even with a slowdown in the market already evident.  In America, 2024 housing sales have fallen to their lowest since 1995 for the second year running. Concurrently homebuilding stocks appear to have peaked and are now rolling over – all these patterns are extremely similar to pre- 2008 Global Financial Crisis conditions.  Because the real estate sector generally leads the economy both into and out of recessions, the slow-down is a good indicator that we are already moving through the beginnings of a major downturn.

 

What does this mean for gold and silver?

What is important to remember is that stock and real estate bubbles occur independent to the price of gold and silver.  Hence, precious metals do not factor into any bear markets in those sectors.  However, the result is always positive.  Stocks, housing and precious metals compete against each other for capital.  During a bubble capital flows to the asset class experiencing a boom, in the current circumstance that would be stocks and real estate.  When these asset classes crash capital is redirected to safe haven assets such as gold.  Eventually, when retail investors are priced out of gold, silver becomes popular.  This is why gold runs first then silver follows.

To conclude, being able to remove any hype from your assessment of the market (eg, “Bitcoin is going to US $1M”) allows you to identify the top and shift capital to another asset class before a bear market in a methodical and neutral fashion that is proactive as opposed to reactive.  Liquidating stocks and real estate and shifting into precious metals at this point in the economic cycle could be a life changing event for those in a position to do so.