Rising Global Tensions, Tariffs and Gold: Understanding the Current Market Environment

In recent weeks, global markets have been navigating a combination of renewed trade policy developments and ongoing geopolitical discussions. These factors have influenced investor sentiment across equities, currencies, commodities and precious metals including gold.

Below, we outline the key developments and explain how tariffs and geopolitical negotiations can influence gold prices within a broader economic context.

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1. Trade Policy Developments and Market Sensitivity

The United States has recently reintroduced temporary import duties on certain goods, with rates initially around 10% and proposals to increase some tariffs toward 15%. These measures are presented as part of efforts to rebalance trade and support domestic production.

Trade policy adjustments of this nature often introduce uncertainty into financial markets. Businesses may face higher input costs, supply chains can be reassessed, and currency markets may react to shifting economic expectations.

Tariffs can contribute to inflationary pressures by increasing the cost of imported goods. At the same time, they may affect economic growth projections if trade volumes decline or production costs rise.

In periods where inflation expectations rise or growth forecasts are revised, some investors review their asset allocation. Gold has historically been used by some market participants as a store of value during periods of currency fluctuation or policy uncertainty. However, gold prices are influenced by multiple variables and do not move in a straight line.

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2. Geopolitical Negotiations and Risk Assessment

Alongside trade developments, diplomatic discussions between the United States and Iran have continued at a technical level. While negotiations are ongoing, markets often assess the broader implications of geopolitical dialogue, particularly in regions central to global energy supply.

Periods of geopolitical tension or negotiation can influence commodity markets, currencies and bond yields. Even when diplomatic engagement is underway, investors may factor in a range of possible outcomes.

Historically, gold has sometimes seen increased demand during periods of geopolitical uncertainty. That said, gold has also experienced periods of decline during similar environments, depending on broader economic and monetary conditions.

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3. How Tariffs and Tensions Can Influence Gold

There are several mechanisms through which trade and geopolitical developments may affect gold prices:

• Currency Movements

Trade policy shifts and diplomatic developments can impact major currencies, including the US dollar. Gold is typically priced in dollars, meaning currency strength or weakness can influence international gold demand.

• Inflation Expectations

If tariffs contribute to higher import costs, inflation expectations may adjust. Gold has historically been considered by some investors as a potential hedge against inflation, although its effectiveness can vary depending on timeframe and broader monetary conditions.

• Portfolio Diversification

During periods of uncertainty, some investors reassess portfolio diversification. Gold is sometimes included within diversified portfolios due to its historical low correlation with certain financial assets. However, correlation patterns can change over time.

• Market Sentiment

Financial markets respond not only to confirmed events, but also to expectations. Anticipation of trade negotiations, policy shifts or geopolitical developments can influence asset allocation decisions, including exposure to precious metals.

It is important to recognise that gold prices are influenced by a wide range of factors, including interest rates, central bank policy, currency strength, investor demand and broader economic conditions.

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4. What This Means for Investors

At Roman Brothers, we have observed that periods of heightened global discussion, whether around trade policy or diplomacy, often prompt questions about gold’s role within a portfolio.

Key considerations include:

✔ Gold is not guaranteed to rise
Gold has experienced both advances and declines across different economic cycles.

✔ Short-term volatility is normal
Gold prices can fluctuate significantly in the short term, influenced by interest rate expectations and currency movements as much as geopolitical news.

✔ Diversification remains central
Some investors consider gold as one component of a broader diversified portfolio rather than a standalone strategy.

✔ Context matters
Trade policy, inflation, monetary policy, and geopolitical discussions are interconnected. No single factor determines gold’s direction in isolation.

Past performance is not a reliable indicator of future results.

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Markets reflect a combination of economic policy, geopolitical dialogue, inflation expectations and currency dynamics. Trade tariffs and diplomatic negotiations form part of that broader picture.

Gold has historically been used by some investors as a tangible asset during periods of uncertainty, but it carries risk and does not provide guaranteed protection. As with any asset class, careful consideration of objectives, timeframe and risk tolerance is essential.

If you would like to discuss whether physical gold aligns with your broader financial objectives, our team is available to provide information about available products and structures, contact us on 0208 080 2848.

The value of gold can rise as well as fall and investors may receive less than they originally invested. Past performance is not a reliable indicator of future results. This communication is for information purposes only and does not constitute personal investment advice. Tax treatment depends on individual circumstances and may change.