Gold Investors Navigate Trade War Whiplash

Precious metals investors have endured unprecedented market volatility in 2025 as gold prices ricocheted between record highs and sharp corrections, leaving fund managers and retail buyers struggling to adapt their strategies amid rapidly shifting U.S.-China trade relations that have pushed the metal up more than 25% since January despite recent pullbacks, according to CNBC’s latest gold market analysis.

The price swings have intensified in May as diplomatic efforts to resolve trade tensions gain momentum, with gold retreating nearly 2% to $3,307 per ounce on Wednesday following the announcement of a U.S.-UK trade agreement before bouncing back above $3,340 on Friday as markets reassessed expectations for this weekend’s high-stakes meeting between American and Chinese officials in Switzerland.

Historic Price Swings

The gold market has witnessed some of its most dramatic price action in modern history during the first half of 2025. After starting the year around $2,650 per ounce, prices surged to an all-time high of $3,500 in April when President Trump announced sweeping tariffs that sparked fears of a global trade war and potential recession.

“I’ve been in this business for 30 years and have never seen such extreme price movements in such compressed timeframes,” said Jennifer Richards, senior portfolio manager at Global Precious Metals Fund. “The tariff announcements created panic buying that drove prices up nearly $850 in just six weeks—a move that would normally take years to develop.”

Trading Strategies Evolve

The heightened volatility has forced investors to adapt their traditional approaches to the gold market. Many institutional players have shortened their investment horizons, implementing more tactical trading strategies rather than viewing gold purely as a long-term portfolio diversifier.

“The predictable inverse correlation between gold and the dollar has become the dominant trading signal in this environment,” explained Robert Minter, director of investment strategy at abrdn. “When we see dollar weakness ahead of significant trade developments, like we did Friday morning, it creates almost mechanical buying pressure in gold regardless of the longer-term fundamental outlook.”

UK Deal Sets Precedent

Gold prices experienced a sharp 2.5% decline earlier this week following the announcement of what President Trump and British Prime Minister Keir Starmer called a “breakthrough deal” on trade. While the 10% tariff on British goods remains in place, the UK agreed to lower its duties to 1.8% from 5.1% and provide greater access to American products.

This agreement—the first significant tariff resolution since Trump’s sweeping “reciprocal” duties were announced—has important implications for the precious metals market. “If we also get a deal ironed out between U.S. and China, there’ll be a lot of resistance to the upside and gold should trade back down to, at the very least, $3,200,” predicted Bob Haberkorn, senior market strategist at RJO Futures.

ETF Flows Signal Positioning

Investment flows into gold-backed exchange-traded funds (ETFs) have provided real-time insight into market sentiment throughout the recent volatility. After recording their strongest monthly inflows since 2020 in April, these investment vehicles experienced modest outflows in early May as trade tensions appeared to ease.

However, this trend reversed again in recent days as investors repositioned ahead of the weekend’s U.S.-China meeting, with daily inflow data showing renewed interest in the sector. “ETF activity has become a crucial barometer in this environment,” noted Michael Peterson, ETF analyst at Bloomberg Intelligence. “We’re seeing much more responsive allocation shifts than in previous market cycles.”

Central Bank Positioning

While speculative trading has dominated short-term price action, central bank purchasing has provided a more stable underlying foundation for the gold market. Official sector buyers have maintained their multi-year acquisition trend, with China, Russia, India, and several Middle Eastern nations continuing to add to their reserves.

This institutional buying has been particularly notable during price dips, creating effective support levels that have prevented deeper corrections. Central banks added approximately 800 metric tons to their holdings in 2024, and early 2025 data suggests this pace has accelerated amid global economic uncertainty.

Federal Reserve Considerations

Beyond trade developments, investors are closely monitoring Federal Reserve policy signals for their potential impact on gold prices. Following its May meeting, the Fed maintained interest rates at 4.25-4.50% but acknowledged that “uncertainty about the economic outlook has increased further” in its post-meeting statement.

“Powell held his cards very close, repeating the message that the Fed will ‘wait and see’ and that it cannot be pre-emptive,” noted market analysts reviewing Chair Jerome Powell’s press conference. This cautious stance has supported gold prices, as lower interest rates generally benefit non-yielding assets like precious metals by reducing their opportunity cost.

Forward Outlook

As investors prepare for Monday’s market reaction to the weekend’s diplomatic engagement, trading desks are positioning for continued volatility. While significant progress toward resolving the U.S.-China trade dispute could trigger renewed selling pressure on gold, a breakdown in talks might quickly push prices back toward record territory.

“The structural case for gold remains compelling regardless of short-term trade developments,” concluded Richards. “Elevated government deficits, geopolitical tensions beyond just trade issues, and the likelihood of eventual monetary easing all suggest that even with periodic corrections, the longer-term trajectory for precious metals remains positive.”