Gold has surged 46% from January 2024 to February 23, 2025—more than double the gains of the S&P 500 (26%) and NASDAQ (30%). While many headlines blame tariffs for recent gold price fluctuations, the reality behind gold’s price movement is far more complex. The issue isn’t tariffs themselves but the systemic cracks in the global monetary system that have been forming long before these trade policies were enacted.
Understanding the Impact of Tariffs on Gold
To better assess the effect of tariffs, it's useful to review past data. On March 1, 2018, when President Trump first announced tariffs, gold was trading around $1,300 per ounce. Initially, prices climbed to $1,350 by mid-April, but ended the year at approximately $1,280. While tariffs can influence gold prices by shaping investor sentiment and economic expectations, they are just one of many factors driving gold’s valuation. Supply chain disruptions, currency devaluation, and geopolitical tensions often play a more significant role in determining gold's price movements.
Tariffs and the Cracking Paper Gold Market
While tariffs contribute to short-term volatility, the bigger concern lies in supply chain shifts and a growing disconnect in the paper gold market. Since precious metals were not excluded from tariffs, commercial banks and large dealers have redirected their supply chains from Mexico and Canada to European sources like Switzerland and England.
The Shift from LBMA to COMEX/NYMEX
A fundamental shift is underway in gold trading, with physical gold flows moving away from the London Bullion Market Association (LBMA) and Bank of England to U.S.-based exchanges like COMEX and NYMEX. Since the election, nearly 4000 metric tons of gold have moved to New York. Nationalism is replacing globalism as countries reclaim their gold reserves. Germany began repatriating its gold in 2006, and more recently, BRICS nations have removed their holdings from the Bank of England and LBMA.
Physical Gold Demand Is Breaking the System
A growing disconnect between the paper and physical gold markets is evident, with delivery times increasing from two days to as long as eight weeks. Much like fractional banking, it appears the LBMA and Bank of England may not hold all the gold they claim, prompting investors to demand physical possession. Since the election, an increasing number of gold futures contracts have been settled via delivery, rather than cash.
The disparity between Western paper gold markets (COMEX, NYMEX, LBMA) and China’s Shanghai Gold Exchange International (SGEI) is also widening. The SGEI pays a premium and settles contracts in physical gold. While traders arbitrage these differences, the trend suggests waning trust in paper gold, with investors seeking to eliminate counterparty risk. If this continues, it could expose vulnerabilities in the fractional gold reserve system, potentially triggering a crisis.
Is the U.S. Government Considering Revaluing Gold?
Recent events have fueled speculation that the U.S. government may consider revaluing gold on its balance sheet:
1. Audit of Fort Knox: President Trump and Elon Musk have called for an audit of Fort Knox, where the U.S. holds approximately 8,113 metric tons of gold. The reserves haven’t been audited in over 50 years.
2. Remarks from U.S. Treasury Secretary Scott Bessent: He recently stated, "We're going to monetize the asset side of the U.S. balance sheet for the American people."
3. Gold's Official Valuation: On the government’s balance sheet, gold is still priced at $42.22 per ounce, while market prices have surged past $2,950. If the U.S. were to revalue gold at its true market price, it could dramatically increase the government's borrowing capacity and reduce interest expenses, now surpassing defense spending.
Is the U.S. moving its gold in anticipation of an audit or revaluation? With government spending cuts unlikely, there are limited options to reduce debt or interest payments. Historically, nations have used gold revaluation to stabilize their financial systems. However, a mark-to-market adjustment can only be done once, making it a pivotal decision.
Gold’s Explosive Growth Signals Systemic Issues
Central banks and institutional investors are rapidly shifting toward gold due to mounting concerns over fiat currencies, particularly the U.S. dollar.
1. Long-Term Devaluation Risks: Overprinting, soaring national debt, and unchecked deficit spending continue to erode the dollar’s value.
2. Loss of Trust in Dollar-Denominated Assets: Since March 2022, when the U.S. froze $300 billion in Russian foreign reserves, other nations have recognized the counterparty risks associated with holding U.S. Treasury bonds. Gold, as a neutral, sovereign-free asset, has become the preferred alternative.
3. Accelerating Central Bank Gold Purchases: Central banks are accumulating gold at record levels, exceeding 1,000 tons annually—and double the 2021 levels. China, Russia, and India are aggressively increasing reserves while offloading U.S. Treasuries. China, in particular, has reduced its exposure to American debt in favor of gold, signaling doubt about the U.S. dollar’s role as the world’s reserve currency.
4. Retail Investors Have Yet to Join: Historically, retail investors lag behind institutional investors in gold accumulation. This current rally is driven by central banks, institutions, emerging markets, and eastern investors. Retail investors typically react to negative market sentiment rather than proactively investing. Recent economic data—such as inflation creeping back up in January, mass layoffs in both the government and private sector, and Walmart’s cautious 2025 outlook—suggests that uncertainty is growing about the U.S. economy’s direction. If retail investors begin to move into gold, it could further accelerate the market’s momentum.
Conclusion: The Real Problem Isn’t Tariffs
While tariffs may be an easy scapegoat for short-term gold price movements, the bigger picture tells a different story. The explosive rise in gold prices, record-breaking central bank purchases, historic debt levels, and increasing distrust in paper gold markets all point to a global financial system under growing strain. The question isn’t whether gold will continue to rise—it’s whether the financial system can withstand the mounting pressures before a major recalibration takes place.
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Alex Ebkarian is the COO and co-founder of Allegiance Gold, a leading full-service physical precious metals dealer. With over 20 years of experience in investment and financial services, Alex’s passion for gold began during his childhood in Lebanon, witnessing firsthand gold’s role as a safeguard during hyperinflation. This belief was further reinforced during the Great Recession, when gold preserved its value while conventional assets plummeted.
Since 2017, Allegiance Gold has earned a reputation for excellence through education, transparency, and strong relationships. The company earned an A+ from the Better Business Bureau (BBB), a AAA rating from the Business Consumer Alliance (BCA), a 5-star rating from TrustLink; and 4.9 stars from TrustPilot. Allegiance Gold was also recognized on the Inc. 5000 list of fastest-growing private companies in 2023 and 2024.
As a regular contributor to financial media outlets, Ebkarian shares valuable insights on precious metals, underscoring his commitment to educating and empowering investors. He holds a Bachelor of Science in Finance. Beyond his professional pursuits, Alex enjoys spending time with his wife and two sons, building a legacy for future generations.