The gold market is on fire. Prices have shattered records, surging past $3,145 per ounce, and igniting speculation that $3,500 could be the next major milestone. But what’s driving this historic rally—and can it maintain its momentum? Let’s dive deep into the factors at play and evaluate whether gold can sustain its impressive rise or if it’s headed for a correction.

The Catalyst: Trump’s Tariff Countdown

The immediate spark behind gold’s surge is the looming April 2 announcement of sweeping U.S. tariffs under former President Donald Trump. Traders are bracing for a potential global trade war, fearing retaliatory measures from China, the EU, and other major economic players. This uncertainty has pushed investors toward safe-haven assets like gold.

Why Tariffs Matter

New tariffs could create widespread disruption in global supply chains, stoke inflation, and slow economic growth. This is a perfect storm for gold, which thrives in volatile and unstable environments.

Looking back, similar trade tensions during Trump’s first term (2018–2020) saw gold increase by 50%. As a result, markets are anxious about the possibility of a repeat—this time, with even higher stakes.

Economic Anxiety: Recession Risks and Safe-Haven Demand

While tariffs are a significant driver, gold’s rise is also being fueled by broader macroeconomic fears.

Recession Risks

Goldman Sachs recently raised its forecast, assigning a 35% chance of a U.S. recession—up from 20% previously. This increase is driven by fading consumer and business confidence, which is spurring worries about an economic downturn.

Stagflation Fears

The combination of rising inflation and slowing growth is creating the perfect conditions for stagflation. Gold’s role as a hedge against both inflation and stagnating growth has made it a go-to asset for investors seeking stability.

Dollar and Yields Defy Gravity

Typically, a stronger U.S. dollar and rising Treasury yields would be expected to dampen gold’s appeal. However, this time gold is defying traditional market dynamics. The rally is overpowering these headwinds, highlighting the demand for gold as a safe-haven asset during uncertain times.

Investors Double Down: Physical Demand and ETFs

The demand for gold isn’t speculative—it’s structural. We are seeing a shift in how investors are viewing gold, with physical demand and inflows into gold-backed ETFs surging.

ETF Inflows Surge

Gold-backed ETFs have seen 6% growth in 2025, reversing a 4-year outflow trend. This reflects a broader institutional commitment to gold, signaling strong demand from major investors.

China’s Buying Spree

China, a major player in the global gold market, has been actively stockpiling gold, diversifying away from the U.S. dollar amid rising geopolitical tensions. This adds further strength to the gold rally.

Retail Frenzy

On the retail side, gold bars and coins are flying off the shelves. This suggests that smaller investors are losing confidence in traditional markets and flocking to gold as a store of value.

Technical Analysis: Overbought but Unstoppable

Gold’s chart is showing signs of irrational exuberance. The Relative Strength Index (RSI) is deep in overbought territory, currently hovering at 77+, yet prices continue to climb.

Key Technical Levels

The path to $3,500 appears clear, with key support levels at $3,000 and the 50-day moving average rising to around $2,910. If prices manage to hold above the $3,000 level, gold could very well continue its upward trajectory.

Market psychology is playing a significant role as well, with traders in a “buy the dip” mode, fearing they’ll miss out on further gains. The sentiment is overwhelmingly bullish.

Risks: Profit-Taking and Policy Surprises

While gold’s rise seems unstoppable, there are risks on the horizon.

“Buy the Rumor, Sell the Fact”

The strategy of buying on speculation and selling when the reality hits could lead to a short-term sell-off if Trump’s tariffs turn out to be less aggressive than expected.

Profit-Taking

With gold’s price already high, overbought conditions might trigger profit-taking, causing a short-term dip. However, history shows that dips in gold prices are often followed by aggressive buying, as investors view them as an opportunity to accumulate at a lower price.

Policy Surprises

A sudden de-escalation in trade tensions or stronger-than-expected economic data could dent demand for gold, potentially leading to a correction. Investors should be prepared for sudden shifts in market dynamics.

The Road to $3,500: What Needs to Happen?

Major banks, including Goldman Sachs and Morgan Stanley, have suggested that gold could hit anywhere between $3,300 and $4,500 in extreme scenarios. But for $3,500 to materialize, several conditions need to align:

• Tariffs must escalate: Retaliatory measures from trading partners would amplify inflation and growth fears, creating further support for gold.
• Recession signals must strengthen: Weak jobs data, falling consumer spending, or a stock market correction could push more capital into gold.
• ETF inflows must persist: Continued institutional buying will be crucial to validating the rally’s durability.

Silver’s Paradox: Why Isn’t It Keeping Up?

Despite gold’s rally, silver has struggled to keep pace. This highlights gold’s unique appeal, driven by factors that don’t affect silver in the same way.

Gold-Specific Drivers

Central bank purchases and macro funds have been primarily targeting gold, not silver. This is a key difference between the two metals.

Industrial vs. Safe-Haven

Unlike gold, which is a monetary metal, silver’s industrial demand (which accounts for 50% of its total demand) ties it to economic cycles. This makes silver more vulnerable to changes in global economic activity.

Conclusion: Is $3,500 Realistic?

Gold’s current rally is a reflection of a world bracing for chaos. While $3,500 seems bold, the combination of tariffs, recession risks, and structural demand makes it a plausible target.

What Should Investors Do?

• Monitor the April 2 tariffs: The scale and targets of Trump’s policy will be a key factor in determining the direction of gold’s price.
• Watch technical levels: A close below $3,000 could signal trouble, but the trend remains bullish for now.
• Diversify wisely: Gold is increasingly being viewed not just as a hedge, but as a cornerstone asset in investment portfolios.

In a market where the mantra is “don’t fight the trend,” gold’s $3,500 target is no longer a fantasy—it’s a forecast. Buckle up for a potentially wild ride ahead!