Trump’s Trade Wars and Economic Uncertainty Drive Gold Demand
Former President Donald Trump’s aggressive trade policies—marked by tariffs, trade wars, and strained international alliances—have injected volatility into global markets. Economists warn that these measures could trigger inflation, stifle economic growth, and push the U.S. toward recession.
Stock markets have reacted sharply, with the S&P 500 down 10% YTD, the Dow falling 6.4%, and the Nasdaq plunging 15.4%. Investors, seeking stability, are turning to gold as a safe-haven asset, driving its price higher amid a weakening U.S. dollar.
Why Gold is Thriving in the Current Economy
- Safe-Haven Demand: Investors are fleeing stocks and bonds for hard assets like gold.
- Central Bank Buying Spree: In 2024, central banks added 1,045 tonnes of gold to reserves—the 15th consecutive year of net purchases.
- De-Dollarization Fears: Emerging economies, wary of U.S. sanctions (as seen with Russia), are stockpiling gold to diversify reserves.
China, Poland, India, and Turkey led the surge, with the People’s Bank of China (PBoC) holding 2,280 tonnes—5% of its total reserves.
Basel III: The Hidden Catalyst for a Gold-Backed Financial System?
While geopolitical tensions fuel gold’s rise, a little-known banking regulation—Basel III—could be setting the stage for a gold-backed monetary system.
What is Basel III?
Following the 2008 financial crisis, the Basel Committee on Banking Supervision (BCBS) introduced stricter capital requirements to prevent future collapses. Under Basel I and II, gold was classified as a Tier 3 asset, meaning banks had to discount its value by 50%, reducing its appeal.
But in **2019, Basel III reclassified physical gold as a Tier 1 asset—the same as cash and sovereign bonds. This change:
- Eliminates risk-weighting for allocated gold (physical holdings).
- Treats unallocated gold (paper gold like ETFs) as Tier 3, discouraging speculative positions.
- Forces banks to increase Tier 1 capital from 4% to 6% of assets, incentivizing gold ownership.
Implications for the Global Monetary System
- Banks Now Prefer Physical Gold – With zero risk weighting, gold becomes a core reserve asset.
- Accelerating De-Dollarization – As trust in fiat currencies wanes, gold’s role in global finance grows.
- Potential Gold Standard Revival – Could Basel III be the first step toward a new gold-backed system?
Will Gold Prices Keep Rising?
With Trump’s trade policies fueling uncertainty, central banks hoarding gold, and Basel III reshaping bank reserves, the precious metal’s bull run may just be beginning
