GLD Rises as Gold Nears Record High on Trump Tariffs
The traditional store of value is outpacing the S&P 500 in 2025.
All that glitters is not gold. While investors are distracted by the shine of Trump meme coins and crypto deregulation, gold is trading less than 1% off its all-time high price as the SPDR Gold Shares (GLD) outperforms the S&P 500 index in 2025.
Following the excitement over President Trump’s day-one executive orders, the looming tariffs had been omitted from his inauguration speech, breathing a sigh of relief into markets.
That relief, however, ended Monday night, when the new president said he planned to put a 25% tariff on products from Canada and Mexico by Feb. 1.
On Tuesday evening, Trump expanded the threat to an additional 10% tariff on China products by the same date, claiming they have been sending fentanyl to Canada and Mexico.
Gold, one of the few commodities that can benefit from potential tariff wars between the U.S. and its trading partners, was trading a mere 30 basis points off its all-time high of $2,790 set in October.
Year to date, GLD is up 5% while the broad stock market benchmark, the SPDR S&P 500 ETF Trust (SPY), is up 3.6%.
The higher gold prices are supported by inflationary concerns and a weaker dollar resulting from the tariff threats as cautious investors flocked to the safe-haven asset.
Why GLD and Gold Prices Rise Amid Tariff Threats
The price of gold and gold ETFs like GLD tends to rise during periods of tariff threats and a weakening U.S. dollar due to these primary reasons:
- Safe-Haven Asset: Gold is considered a store of value during economic uncertainty, such as trade tensions caused by tariffs. Investors flock to gold to hedge against potential market volatility and economic disruptions.
- Weaker U.S. Dollar Impact: Gold is priced in U.S. dollars, so when the dollar weakens, gold becomes cheaper for foreign buyers, boosting demand and driving prices higher.
- Inflation Hedge: Tariffs can increase the cost of goods, leading to inflationary pressures. Gold is traditionally seen as a hedge against inflation, prompting higher demand.
- Diversification Strategy: Investors often diversify portfolios with gold when geopolitical risks, such as trade wars, threaten other asset classes.