Global X’s Investment Strategist Justin Lin sees more gains and flows to gold
By Justin Lim, Investment Strategist at Global X ETFs
The tariffs announced by Trump were worse than expected – the majority of the market expected either a blanket tariff on all exporters, or reciprocal tariffs but not both at the same time. Unlike the previous few rounds of tariffs, Trump seems to be going for maximum pain right out the gate.
Equity markets had a lot to say about the announcements with Nasdaq and S&P 500 futures dipping. Gold by comparison didn’t have a major reaction – gold has drifted up 50bps or so post-announcement in Asian trade today, which likely reflects a “better safe than sorry” attitude in the market instead of a major pivot. The overall lack of significant reaction suggests that most of this worst-case scenario has been priced in. Suffice to say, the announcement hasn’t changed gold’s short term outlook. Gold could rise to US$3,300 on strong momentum and retail buy-in. But for the next leg of the rally, investors much watch how the affected countries react.
In terms of gold flows, we can look to the timeline of gold purchases in Trump’s first term. When comparing Q1 2025 flows to the 2018-19 round of tariffs on a monetary scale – gold investors appear to have had a much stronger reaction this time round. US$12 billion in ETF inflows this quarter vs just US$5 billion in Q4 of 2018 – it wasn’t until Q3 2019 that we saw US$13 billion in inflows in a single quarter.
However, if you observe the timeline of purchases by tonnage, the buying we’ve seen in Q1 2025 instead closely resembles that of Q4 2018 when tariffs first kicked off. Investors bought 115 tonnes of gold then, 135 tonnes today. It was only when trade wars escalated in 2019 that investors bought 262 tonnes of gold in Q3 of 2019. For reference, if that volume of purchase transpires today, that would represent almost 30 billion of inflows into global gold ETFs.
Price Drivers
Central banks were major drivers of the gold price from 2022 through 24. ETF investors have actually been net sellers for ever since 2021. Investors were underweight gold heading into 2025. With tariffs causing fears around higher inflation, slowing economy and risks of trade wars on the horizon, I believe gold will make its way back into portfolios in a big way. Especially after its stellar performance over the past two years.
This is not to say that central banks will stop their gold accumulation this year – in fact, post-2022 (Russia’s invasion of Ukraine), central banks outside the US allied network have been relatively price-insensitive accumulators of gold. So, we still expect central banks to provide price support, but the upside potential will be driven by ETF investors over this period.
The lack of options in asset allocation also plays a role in this. You would think bonds would be one of the natural safe havens benefiting from this environment —but surprisingly, we’ve seen lower interest than expected. That’s likely due to their recent volatility, especially at the long end of the curve, thanks to shifting inflation and interest rate expectations. In contrast, gold’s exemplar performance has really helped it establish itself as the go-to asset for macro hedging.
