Up Only 2025: Growing Demand for Gold Amid Global Uncertainty

Inflation, Tariffs, and the Growing Demand for Gold Amid Global Uncertainty

The S&P 500 remains on track to hit 7,000 by year-end, despite recent volatility driven by geopolitical tensions and economic shifts. Investors may want to maintain an overweight position in sectors such as Information Technology, Communication Services, Industrials, and Financials.

The U.S. stock market has largely climbed since the last election, even with disruptions caused by DeepSeek’s impact on AI stocks and the latest round of tariff policies. While DeepSeek’s advancements have raised questions about AI cost efficiencies, major players like Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL) continue to invest heavily in AI infrastructure. Amazon CEO Andy Jassy recently reaffirmed that AI demand is still on an upward trajectory.

The Impact of New Tariffs

The stock market took a hit on February 7, following an announcement about a new round of reciprocal tariffs. The move represents a significant shift in trade policy, replacing an across-the-board tariff system with individual trade negotiations. While disruptive in the short term, this approach could create opportunities for tariff reductions through strategic bargaining.

However, these new tariffs have also unnerved the bond market, as higher import costs may trigger inflationary pressures. The recent spike in bond yields suggests that investors are reassessing the economic outlook, particularly with the potential for rising consumer prices.

Key Market Trends


1. Inflation Expectations Rise
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The University of Michigan’s consumer sentiment survey reported a jump in one-year inflation expectations from 3.3% to 4.3%. This data came shortly after the announcement of 25% tariffs on Mexico and Canada, which were later postponed by 30 days. Meanwhile, an additional 10% tariff on Chinese goods has already led to retaliatory measures from China.

With inflation risks back in focus, the likelihood of further Federal Reserve rate cuts in 2025 has diminished. At this stage, the consensus suggests that the Fed may hold steady for the remainder of the year.

2. Gold Prices Surge

Gold prices have hit record highs, reflecting growing investor demand for safe-haven assets. Some of this surge can also be linked to rising infrastructure spending, particularly in data center expansion, which has contributed to higher copper prices as well.

Looking ahead, gold could potentially reach $3,000 per ounce soon, with a possible climb to $4,000 in 2026. This trend is fueled by central banks in nations wary of U.S. sanctions, as they continue accumulating gold to safeguard against financial restrictions.

3. Copper and China’s Economy

While rising copper prices are often seen as a sign of economic growth, the latest rally does not necessarily indicate a stronger Chinese economy. China’s 10-year bond yields have dropped back to record lows, suggesting weak domestic demand. Additionally, China’s reaction to recent U.S. tariffs has been more subdued than expected, possibly due to economic struggles limiting its ability to retaliate aggressively.

4. Bitcoin and Market Volatility

The current tariff-related turmoil has led to a rise in uncertainty, boosting gold as a preferred risk-off asset. On the other hand, Bitcoin (BTC)—typically viewed as a risk-on investment—has struggled in comparison. The cryptocurrency market appears to be lagging behind gold, reflecting a cautious investor sentiment.

5. Market Outlook: A Path to 7,000?

Despite near-term volatility, the S&P 500 is expected to resume its upward trajectory, with a year-end target of 7,000. Investors should consider maintaining an overweight position in key sectors, particularly financial stocks within the MidCap 400 and SmallCap 600 indexes. These segments may outperform as long as market turbulence surrounding trade policies persists.

With inflation risks, shifting trade strategies, and continued technological investment shaping market conditions, staying agile will be critical for investors navigating 2025’s economic landscape.