Protectionism,policy caution and the case for gold

As the global economy walks a narrow ridge between easing inflation and resurgent protectionism, gold is once again reclaiming its role as the ultimate barometer of uncertainty.

According to VT Markets, the prospect of a sweeping 15% global tariff could send destabilising shockwaves through supply chains. For import-reliant sectors, the immediate impact would be higher input costs. Companies would then face an unenviable trilemma: absorb shrinking margins, reconfigure sourcing networks at considerable expense, or pass costs on to consumers. None of these options is benign.

The broader macroeconomic fallout could be more troubling. Tariffs of such magnitude would likely stoke inflationary pressures, particularly for goods dependent on complex cross-border production. Retaliatory measures from trading partners could follow, depressing global trade volumes. The result, experts warn, may be a toxic mix of slowing growth and stubbornly high prices — an echo of stagflationary episodes policymakers are keen to avoid.

Currency markets would not remain insulated. Initial risk aversion could lift the US dollar as investors rush towards perceived safety. Yet weaker growth expectations and shifting capital flows could just as easily trigger sharp reversals, injecting volatility into foreign exchange markets. It is precisely in such moments of instability that gold traditionally thrives.

Gold’s appeal, experts argue, lies in its role as a hedge against policy missteps, inflation uncertainty and reserve-concentration risk. Emerging-market central banks, already diversifying away from excessive dollar exposure, could accelerate allocations to bullion if trade tensions erode confidence in the greenback. Should tariff disputes harden into a prolonged economic confrontation, the decisive variable for gold would be real yields. Tariff-induced inflation combined with softer growth typically suppresses real interest rates — a dynamic historically supportive of higher gold prices.

The principal caveat is the risk of a liquidity shock. In a severe market dislocation, investors may be forced to liquidate gold holdings to cover losses elsewhere, temporarily weighing on prices. Over the medium term, however, protectionism, reserve diversification and macroeconomic volatility together appear to underpin firmer support levels for the metal, punctuated by short-lived, headline-driven swings.

Meanwhile, a market analyst at VT Markets observes that financial markets are navigating a more measured transition. Headline inflation has cooled to around 2.4%, largely due to softer energy prices. However, underlying price pressures remain uneven, with essential costs still elevated, complicating the policy calculus for the US Federal Reserve.

Markets are increasingly pricing in interest-rate cuts, but not imminently. Expectations point to a gradual and deliberate easing cycle rather than an abrupt pivot. In this environment, asset classes may remain range-bound, driven more by technical levels and momentum than by sweeping macro convictions.

Gold, the analyst notes, will remain acutely sensitive to shifts in rate expectations, particularly around key technical retracement levels. Broader commodities such as silver and oil may consolidate in the absence of stronger catalysts, while equities — including the S&P 500 — could extend gains in the near term before encountering resistance and potential pullbacks.

Taken together, the outlook is one of contained tension rather than decisive resolution. Inflation is cooling, but not conquered. Policy easing is anticipated, but restrained. Trade risks simmer in the background. In such a landscape, gold’s enduring allure as a hedge against uncertainty appears unlikely to dim.