Gold zoomed on the concern of Trumpcession and US hegemony

·       After the Russian fiasco, many countries including China, India, Thailand and Poland are steadily shifting from USD/UST assets to physical gold in their custody

·       As par US M2 and estimated growth under Trump 2.0, Gold may scale $3275-3555 and even 3655 in 2025-26 under the Trumpcession scenario; fair value around $2950

·       But Gold may also slide to $2700 levels if megalomaniac Trump secedes to monetize a part of the US gold reserve to reduce US public debt, now running over $40T (Federal +States)

·       Gold may also come down if Trump takes dovish trade war policy and the US economy does not face any real risk of stagflation or recession

As highly expected, Trump postponed the implementation of reciprocal (ad-valorem) tariffs by 90 days except China as he claimed that over 75 other countries all over the world have called the White House, requesting for a negotiation. Subsequently, stock futures on both sides of the Atlantic and even the Pacific soared except China. Gold briefly slid as USD/US bond yield surged on temporary tariff relief and fading concern of an all-out stagflation or even a recession in the US.

But Gold again surged early Asian Thursday, April 10, 2025, and USD, Wall Street Futures slid as even a 10% basic universal tariff on all US merchandise imports is still meaningfully higher than earlier 2.5% tariffs. The weighted average of Trump’s ad-valorem reciprocal tariffs would be around 27.5%; if implemented at face value or as published on the so-called Tariff Liberation Day on April 2, 2025.

Again if we consider theoretically 145% tariffs on Chinese exported goods into the US under Trump 2.0, consisting of almost 15% of total US merchandise imports and 10% universal basic tariffs on the rest 85% imported goods along with sectoral metal & auto tariffs of 25% weighted average tariffs would be over 27.5% against 2.5% earlier, which would be significantly higher than pre-reciprocal tariffs era of 2.5% on an average.

This will inevitably cause a higher cost of living for Americans, subdued discretionary consumer spending, tepid private capex (investments), higher unemployment, and lower economic growth; i.e. an imminent stagflation or even an an-all-out recession. The concern of Trumpcession is one of the primary factors behind the Gold rush and a plunge in stocks, USD. But despite that haven appeal US bonds are also sliding as major global central banks like China’s PBOC, India’s RBI and many others are steadily diversifying their FX assets from USD/UST denominated to physical Gold under their custody amid increasing tendency by the US to use USD dominance as a weapon in scoring geopolitical issues.

The US seized the USD assets of many enemy countries like Russia, Iran, North Korea, and Venezuela in the last few years. The US Treasury Department is also controlling USD assets and Gold of Ukraine and Israel. Thus China’s PBOC, India’s RBI and Thailand’s Central Bank are steadily shifting from USTs to physical Gold. This may be the primary reason behind Gold’s epic run in the last year in addition to lingering geopolitical tensions like Gaza and Ukraine war.

Gold’s price has surged dramatically over the last two years, climbing from an average of $1225 per ounce in 2010 to $1200 in 2019 and then almost $3240 by early April 11, 2025. Gold was boosted after COVID COVID-related deluge of monetary and fiscal stimulus. This rally, one of the most significant in recent history, stems from a convergence of economic, geopolitical, and monetary factors that have amplified gold’s appeal as a safe-haven asset and store of value.

Lingering Geopolitical Tensions and Safe-Haven Demand

Global instability has been a major catalyst. Ongoing conflicts, such as Russia’s war in Ukraine and tensions in the Middle East, have rattled markets. Trade disputes, particularly U.S. tariffs under the Trump administration in 2025, have heightened economic uncertainty. When stocks wobble—like after the 2025 tech selloff sparked by a Chinese AI (Deep Seek) breakthrough—investors flock to gold for stability. Gold thrives in chaos because it’s tangible and isn’t tied to any one country’s economy, unlike stocks or bonds. This “fear trade” has been a consistent driver, as gold’s historical role as a hedge against systemic risk shines through. The lingering conflict in Ukraine and tensions in the Middle East have heightened global uncertainty, driving investors towards gold as a safe-haven asset.

Central Bank Buying and De-Dollarization

Central banks, especially in emerging markets like China, India, and Russia, have been hoarding gold at unprecedented rates. In 2024 alone, global central bank purchases hit record highs, with India’s RBI adding 72.6 tonnes and China steadily diversifying reserves. This isn’t just about portfolio balance—it’s a deliberate move to reduce reliance on the U.S. dollar. The freezing of Russia’s dollar reserves in 2022 spooked non-Western nations, prompting them to stockpile gold as a hedge against potential sanctions or dollar weaponization. With global M2 money supply ballooning to $90.2 trillion by 2025 (up from $40 trillion in 2010), much of this liquidity has flowed into hard assets like gold, as faith in fiat currencies wanes.

Central banks have significantly increased their gold reserves, particularly since the freezing of Russian central bank assets in 2022. This trend is driven by a desire to diversify away from dollar-dominated reserves and mitigate risks associated with foreign currency holdings. Notable buyers include countries like India, Kazakhstan, and Poland.

Monetary Policy and Low Interest Rates

The Federal Reserve’s actions have been pivotal. After hiking rates to combat inflation in 2022-2023, the Fed pivoted to cuts in 2024, with further reductions expected into 2025. Lower interest rates make gold more attractive, as it doesn’t pay interest like bonds or savings accounts. When yields on 10-year Treasuries drop; gold’s opportunity cost shrinks, pulling in investors. The U.S. M2 money supply, which jumped from $8.5 trillion in 2010 to $21.6 trillion in 2025, reflects years of loose policy that fueled asset price inflation, including gold.

Globally, central banks’ money printing—China’s M2 alone is around $30 trillion—has stoked fears of currency devaluation, pushing investors toward gold. Expectations of monetary easing by central banks, such as potential interest rate cuts, make gold more attractive compared to interest-bearing assets. Historically, gold benefits when real interest rates are low or negative, as it offers a hedge against inflation without yielding returns. Historically, gold benefits when real interest rates are low or negative, as it offers a hedge against inflation without yielding returns.

Inflation Fears and Currency Devaluation

Even as headline inflation cooled from its 2022 peak, lingering concerns about long-term price stability persist. The massive expansion of global M2 since 2010 has raised red flags about fiat currency purchasing power. Gold, historically a hedge against inflation, benefits when people worry about currency losing value. In countries like India and China, where gold is culturally significant, retail demand has surged during festive seasons, further tightening supply. The U.S. dollar’s relative weakness in 2024, despite occasional strength, has also made gold cheaper for foreign buyers, boosting demand.

Fears about high government borrowing, trade tensions, and a fragile global trade landscape have increased demand for gold as a store of value. The weakening of the U.S. dollar in some periods has also supported gold prices, as a weaker dollar makes gold cheaper for foreign buyers.

Market Dynamics, ETF Demand, and Investor Behavior

Gold’s rally has been amplified by speculative and technical factors in virtually uncharted territory. As prices broke key psychological levels like $2,500 and $3,000, momentum traders and short squeezes pushed prices higher. Gold ETFs saw inflows of $1.3 billion in India alone in 2024, while COMEX futures showed rising open interest. Meanwhile, supply constraints—gold mining adds only 2-3% to global stocks annually—have kept pace slow, unable to match demand. When tech stocks stumbled in early 2025, capital rotated into gold, reinforcing its upward trajectory. Increased purchases of gold ETFs have contributed to the price rise, especially as declining interest rates make gold more appealing. Speculators have also played a role by increasing their long positions in gold futures, driven by geopolitical risks and economic uncertainty.

Connecting to M2 Growth

The U.S. M2 growth from $8.5 trillion in 2010 to $21.6 trillion in 2024, and global M2 from $40 trillion to $90.2 trillion, reflects a flood of liquidity that’s devalued currencies over time. This ties directly to gold’s appeal: when central banks print money, as they did aggressively during the pandemic and beyond, it erodes trust in paper currency. Gold becomes a refuge for preserving wealth, especially as global debt levels soar and deficits widen. The 2.5x U.S. M2 increase and over 2x global M2 rise since 2010 have created a backdrop where gold’s scarcity and durability stand out.

M2-Money Supply adjusted Gold Price: Fair Value

Gold Fair Value: 2024

USD-Gold Price= (US AVGM2Dec’2024/Dec’2010)* Base Year-2010 Avg Gold Price= (20.8/8.6)*1225=$2963

Gold Fair Value: 2025 assuming projected average M2 for 2025 around $23 trillion (10.5% growth)

USD-Gold Price= (US AVGM2Dec’2025/Dec’2010)* Base Year-2010 Avg Gold Price= (23.0/8.6)*1225=$3276

Conclusions

Gold’s rally isn’t just about price—it signals deeper anxieties about the global financial system. Central banks are diversifying, investors are hedging, and markets are bracing for volatility. But it’s not bulletproof: gold can be volatile, and if geopolitical tensions ease or rates rise sharply, it could correct. Still, the structural trends—money supply growth, de-dollarization, and geo-political and economic uncertainty—suggest gold’s shine won’t fade quickly. Gold is a haven during periods of conflict and global instability.

Gold is a big beneficiary of higher public deficit, higher public debt, and increasing devaluation of local currency unit (LCU). Gold has acted as an inflation hedge asset for centuries with a haven appeal. Gold jumped almost 75% after the Gaza war broke out. In many countries involved in significant never-ending geopolitical tensions like in the Middle East, Eastern Europe, Central Asia, Africa-where local currencies are unstable, highly volatile and devalued significantly by both geopolitical and macro-economic factors, people are increasingly using/hoarding USD and Gold. Exploding U.S. national (Federal + states) debt (now over $40 trillion) and persistent fiscal deficits have spooked investors. Gold is seen as a hedge against fiscal irresponsibility and potential long-term inflation due to debt monetization.

Gold's epic rally over the last two years (2022–2025) is driven by a combination of macroeconomic, geopolitical, and structural market forces. Record purchases by global central banks, especially from emerging markets like China, India, Turkey, and Russia, to diversify away from the US dollar and reduce reliance on Western financial systems. In 2022 and 2023, central banks bought more gold than at any time since the 1950s. Central banks were scrambling for gold after seeing the US and also EU/Europe using USD/EUR FX assets of Russia seized after the Ukraine war broke out. Central Bank Gold Buying (Especially EMs) countries like China, Russia, India, and others have been massively accumulating gold to diversify away from the U.S. dollar and reduce exposure to Western financial cross-border payment systems like SWIFT.

Gold is traditionally seen as a hedge against inflation, especially when real interest rates (interest rates minus inflation) are low or negative. As the US Federal Reserve (Fe and other central banks signal potential rate cuts in 2024/2025, gold becomes more attractive (it doesn’t pay interest, but lower rates reduce opportunity cost). Investors turn to gold when they fear economic slowdown stagflation or recession. Chinese retail gold demand surged due to concerns over real estate, the stock market, and the Trump trade war.

Poor performance or volatility in traditional assets like tech stocks, real estate, and crypto (especially during crypto winters) pushed investors towards gold. Gold’s rally is the result of a “perfect storm” of central bank demand, inflation, geopolitical risk, and weakening faith in fiat currencies—especially the US dollar. Inflation and Loss of Confidence in Fiat Currencies in many parts of the world are boosting the appeal of Gold. There’s growing long-term fear that fiat currencies may lose purchasing power, making gold an attractive store of value.

Bottom line

Gold may have run too much (almost 20%) in too short a period in the last few months since January 2025 amid the Trump trade war and other policy tantrums and the escalating concern of Trumpcession. Looking ahead, Trump may blink on his trade war rhetoric and may also monetize part of the US Gold reserve to pay down US debt. This may push Gold towards $2700 levels. As per projected CY25 and CY26 US M2 estimates, Gold may scale 3275 and 3655 in 2025-26.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 38900) now has to sustain over 39500 for a further recovery to 39800/40000-40200/40700 and further rally towards 4100/41500-41700/42000 and 42700/42900-43200/43500 and 43700/44050 and 44250/44400-44500/44800 and 45000/45200-45300/45500 and even 45700/45800-45900/46000 in the coming days; otherwise sustaining below 39450, DJ-30 may again fall to 39100/38700-38000/36500-36200/33100 in the coming days.

Similarly, NQ-100 Future (17800) has to sustain over 18500 for a further rally to 19000/19500-20000/20900 and 21300/21500-21700/21850 and 22050/22200-22350/22500 and 22700/23000-23300/23500 in the coming days; otherwise, sustaining below 18400, NQ-100 may again fall to 18100/15800-14100/13600 in the coming days.

Also, technically Gold (CMP: 3000) has to sustain over 3025 for a further rally to 3055/3075-3100/3150 and 3175/3186*-3200/3225 and further 3255/3275*-3305/3325* and even 3500-3555 otherwise sustaining below 3015, Gold may again fall to 2990 and 2965/2955-2900/2880 and 2850/2835-2810/2780-2780 and 2745/2725-2695/2665 and further 2635/2600-2585/2560 in the coming days.