Why Gold Is the Real Winner of the US-China Trade War

ETF flows tell a different story. Western investors have been slower to join the rally. Global gold ETFs saw net inflows of $2.3 billion in the first quarter, a fraction of the $14 billion that poured in during Q1 2024. The gap suggests that the current move is driven by official-sector buying and Asian retail demand, not the speculative long that Wall Street piled into last year. That makes the rally harder to fade but also more vulnerable to a policy surprise.

The risk is a trade truce. If the US and China reach a deal that rolls back tariffs, gold could give back some of its safe-haven premium quickly. The metal fell 6% in the three weeks after the Phase One deal in January 2020. A repeat would test the $2,900 support zone. For now, though, the tariff escalation has no obvious off-ramp. The next scheduled talks are in mid-April, and neither side has signaled flexibility.

For traders watching the gold rally, the key question is whether the central-bank bid can absorb a wave of profit-taking. The answer depends on how the tariff story resolves. If the conflict widens, gold has room to run. If it de-escalates, the metal's recent gains look stretched against a backdrop of rising real yields. The next catalyst is Friday's US jobs report, which will shape expectations for the Fed's rate path and, by extension, the dollar's direction against gold.