The Glimmer of Gold

Recently, while strolling in the mall, my friend asked, “when will the Gold price be down again?” It’s a question on many minds!

Gold! The yellow metal has symbolised divinity, wealth, and power since ancient times! For as long as history has been documented, in most cultures, people have agreed upon its supreme worth and have been willing to sweat, enslave, fight, and even kill for this metal! Thousands of years have passed, yet it has not lost its allure!

Even today, when Trump’s tariff wand has hit almost every industry, gold glimmers as a beacon of stability! The growing fears of inflation, declining market yields, trade uncertainties, and geopolitical tensions are propelling gold prices to unprecedented heights! Since the 2008 financial crisis, through the Brexit vote, the Covid lockdown, the Israel-Iran conflict, and the Russia-Ukraine war, up to the present day, including Trump’s election victory and policy shift, the price of gold has risen from a few hundred dollars to over $3000 per ounce. This significant increase highlights investors’ faith in gold as a dependable safeguard against financial chaos and uncertainty. No surprise, the central banks are offloading dollars and hoarding gold!

According to official government data, the United States boasts 8,133.46 tonnes of gold, while China has reported only 2,279.56 tonnes! However, China has established itself as the world’s largest gold producer, with extensive control over gold mines in its mainland and across Africa and South America. China leads the globe not only in gold production but also in gold imports. Given its significant mining operations and strategic acquisitions, it is highly probable that China’s actual gold reserves far exceed the official figures, potentially surpassing those of the United States! This situation raises questions about the scale of China’s wealth in gold, suggesting that the global balance of power in yellow metal may have shifted!

Even though the US is at the top of the chart, Russia and China have been two of the world’s most aggressive gold buyers. In response to the US sanctions imposed in 2014, Russia strategically turned to gold, acquiring significant quantities by selling US assets. China, too, actively sought to diversify its reserves away from the US dollar. As Donald Trump has prolonged economic sanctions on Russia for yet another year and imposed heavy tariffs on China, the yellow metal would continue to woo both Putin and Xi more than the greenback!

China has introduced a new system allowing its citizens to purchase gold via internet banking on monthly instalments. In the US, it is possible for individuals to buy gold at supermarkets, rendering it unexpectedly accessible. Unlike investing in stocks, which often require extensive financial knowledge, buying physical gold is straightforward and user-friendly. This ease of access and simplicity are key factors driving the robust demand for gold.

In February 2025, China initiated a pilot scheme authorising ten insurance companies to invest their long-term funds in gold. Previously, Chinese insurers were limited to investing in assets with stable income streams, primarily bonds. This new initiative opens up the world’s second-largest insurance market to inject vitality into the global gold market, potentially boosting gold prices significantly. The current tariff threat, market meltdown and subsequent gold rush are acting as an unofficial devaluation of the dollar, a long-sought goal by Trump to make American products more attractive in the global market and reduce the significant trade deficit! Donald Trump has taken decisive steps to reduce USAID funding and aims to limit NATO defence spending, all in a strategic effort to reduce US debts and deficits. He strongly advocates for the Federal Reserve to lower interest rates, ensuring that market participants benefit from affordable capital and gain access to debt refinancing. This critical strategy aims to reduce rising inflation, stimulate economic growth, and ultimately lower the country’s debt-to-GDP ratio. The anticipated interest rate cut has already sparked a surge in gold prices. Here, it is to be noted that during the low-interest era, as the return on dollar assets reduces and fluctuating exchange rates eat away the yield, the investors turn to gold as a secure and attractive alternative for their funds.

The gold rush frenzy will persist until there is speculation that Trump may switch to a gold standard soon. However, it is not a viable alternative since the US lacks sufficient gold reserves to back its currency and counter the combined gold reserves of China and Russia. Hence, instead of opting for another Reverse Nixon by pegging the dollar to gold again, Trump may introduce a dual currency, a strategy employed by China long ago! There is speculation that Trump may introduce a dual currency system, with one currency backed by gold exclusively for the domestic market and a separate currency for international transactions! For a long time, the US dollar has been subject to external volatility as a global trade settlement currency and a significant component of foreign reserves. Hence, to shield the domestic market from external economic shocks in the future, Trump may introduce a separate gold-backed domestic currency! However, to introduce a gold-backed currency even for the domestic market, Trump would have to stockpile gold beforehand!

From medieval alchemists to modern economists, the lustrous metal has always captivated human imagination and aspirations, to turn something worthless into gold, representing our quest for prosperity. In this global economic overhaul, gold is poised to reach a new milestone soon! So stay bullish and enjoy the ride.

(The author is a foreign affairs expert. Views personal.)