Gold Outshines Risk Assets as Trump’s Tariff Wars Intensify

As President Donald Trump’s renewed trade policies rattle global markets, investors are increasingly turning to gold—a timeless safe-haven asset—amid steep declines in equities and cryptocurrencies. With Trump’s administration imposing aggressive tariffs on key trading partners, including Mexico, Canada, and China, gold has emerged once more, as a beacon of stability, outperforming both the S&P 500 and Bitcoin. This article examines the factors driving gold’s resurgence, Bitcoin’s recent struggles, and the broader implications of escalating trade tensions on global markets.

Gold’s Resilience Amid Market Turbulence

Gold prices have maintained a robust uptrend in 2025, even as volatility grips financial markets. On this first trading day of February, gold futures briefly tested support near $2,800 per ounce during overnight trading but rebounded sharply ahead of the North American market open, settling at $2,847.50. This resilience underscores gold’s role as a hedge against macroeconomic uncertainty, particularly as Trump’s tariff threats disrupt supply chains and inflame geopolitical tensions.

The precious metal’s strength contrasts starkly with the S&P 500, which tumbled 1.58% in premarket trading amid fears of prolonged trade disputes. Analysts attribute gold’s outperformance to its historical status as a store of value during periods of economic instability. Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, noted in a weekend report, “Gold may be gaining momentum vs. the stock market and Bitcoin, with unfavorable macroeconomic implications.”

Since December 6, 2024—when Bitcoin first closed above USD $100,000—gold has risen approximately 5%, eclipsing the S&P 500’s 2.7% gain over the same period. This divergence highlights investors’ growing preference for tangible assets as Trump’s protectionist policies amplify market risks.

Bitcoin’s Sharp Decline: A Reality Check for Crypto Bulls

Bitcoin, once hailed as “digital gold,” has faltered in recent weeks. After reaching a record high above USD $105,000 per coin in January 2025, the cryptocurrency has faced intense selling pressure, dropping to a low of $91,530 on Sunday. Although it recovered slightly to $95,135 by Monday morning, Bitcoin remains 13% below its all-time peak.

This downturn has reignited debates about Bitcoin’s viability as a safe-haven asset. Unlike gold, which has preserved wealth through centuries of crises, Bitcoin’s volatility and sensitivity to speculative sentiment have left it vulnerable during market corrections. McGlone emphasized this contrast, stating, “Gold is in a much better position than Bitcoin to attract new safe-haven flows as equity market sentiment sours.”

The cryptocurrency’s struggles also reflect broader concerns about its dependence on macroeconomic trends. McGlone warned that Bitcoin faces a “make-or-break moment,” noting, “A top prerequisite for continued appreciation of the highly speculative digital asset… might depend on the performance of the U.S. stock market.” With the S&P 500 teetering and Treasury yields hovering near multi-decade highs, Bitcoin’s correlation to risk assets has undermined its appeal as a diversification tool.

Tariffs, Trade Wars, and the Flight to Safety

Trump’s latest tariff measures have been a primary catalyst for market unease. By levying significant duties on imports from Mexico, Canada, and China, the administration risks reigniting the global trade wars that defined Trump’s first term. These policies threaten to:

1. Disrupt Supply Chains: Industries reliant on cross-border trade, such as automotive and technology, face higher production costs and delays.
2. Fuel Inflation: Tariffs act as hidden taxes on consumers, raising prices for goods ranging from electronics to agricultural products.
3. Provoke Retaliation: Trading partners may impose counter-tariffs, further straining international relations and economic growth.

In this environment, gold’s appeal as a non-correlated asset has surged. Unlike equities or cryptocurrencies, gold is not tied to corporate earnings, interest rates, or speculative tech trends. Its value derives from scarcity and universal acceptance—a critical advantage when geopolitical and policy risks dominate headlines.

Analyst Insights: Gold’s Strategic Advantage

Bloomberg’s Mike McGlone’s analysis underscores gold’s strategic positioning in 2024. He points to several factors favoring the metal:

1. Deflating “Everything Bubble”: As overvalued equities and speculative assets correct, gold benefits from its reputation as a prudent hedge.
2. ETF Dynamics: Despite four years of outflows from gold-backed ETFs, the metal’s price resilience signals strong underlying demand from central banks and long-term investors.
3. U.S. Fiscal Pressures: Record government deficit spending, which supports both equities and gold, may be nearing a tipping point. “Equities may have reached diminishing returns,” McGlone noted, suggesting capital could rotate into gold as investors seek stability.

Gold’s outperformance relative to the S&P 500 further validates its role in portfolios. “Gold is testing the limits of the great U.S. wealth-creation machine,” McGlone added, hinting at a potential paradigm shift in investor behavior.

Bitcoin’s Uncertain Path Forward

While Bitcoin’s long-term proponents argue it will mature into a digital safe haven, its recent volatility has exposed lingering weaknesses. The cryptocurrency’s decline from all-time highs coincides with fading enthusiasm for risk assets, compounded by Trump’s endorsement—a double-edged sword that ties its fate to political developments.

McGlone highlighted the precarious balance Bitcoin faces: “Bitcoin/gold may be in a ‘must-go-up-or-else’ situation due to President Trump’s endorsement and its implications for risk assets.” With the ratio of Bitcoin’s price to gold ounces stalling near 2021 levels, the cryptocurrency must demonstrate independence from equity markets to regain momentum.

The Road Ahead: Navigating Volatility

As Trump’s trade policies unfold, investors should brace for continued turbulence. Key factors to monitor include:

1. Tariff Escalation: Further restrictions on imports or retaliatory measures from trading partners.
2. Federal Reserve Policy: Interest rate decisions amid sticky inflation and slowing growth.
3. Market Sentiment: Shifts in investor appetite for risk vs. safety.

Gold’s ability to weather these storms positions it as a cornerstone of defensive portfolios. Meanwhile, Bitcoin’s trajectory remains tethered to broader market sentiment, regulatory developments, and its adoption as a credible alternative to fiat currencies.

Conclusion: Gold’s Time to Shine

In an era defined by trade wars, inflationary pressures, and speculative excess, gold’s historical resilience offers a compelling narrative. While Bitcoin and equities grapple with uncertainty, the precious metal’s lack of counterparty risk and universal appeal make it a pragmatic choice for preserving wealth. For investors navigating Trump’s tariff wars, gold’s luster appears unmatched—a testament to its enduring role in an increasingly chaotic financial landscape.

Acknowledgment: This article was written with the help of AI, which also assisted in research, drafting, editing, and formatting this current version.