Bitcoin (BTC) Shines After Trump’s Gold Tariff Scare

Gold (Au), the soft, dense, and extremely malleable metal known for its bright yellow color, corrosion resistance, and high electrical conductivity, is a highly valuable element that is used across jewelry, medicine, electronics, and space exploration.

More importantly, the precious metal is used as a financial exchange as well as for wealth protection.

Gold is widely considered a safe-haven asset, particularly during times of economic uncertainty and market volatility. It tends to hold or increase its value when other risky investments, like stocks, decline, making it an attractive option for investors seeking to preserve wealth and reduce risk in their portfolios.

As of writing, spot gold is trading at around $3,360 per ounce, down about 4% from its all-time high (ATH) of $3,500 in April this year. The ATH was driven by the weak US dollar, trade war, and Federal Reserve uncertainty that caused market instability.

This time around, gold was caught in the crossfire of US President Donald Trump’s reciprocal tariff plans. On news and market speculation that gold imports could be subject to tariffs, the prices of gold futures surged to a record high of $3,534 late last week.

The prices on New York’s Comex briefly traded at a premium over international prices. Contracts for December delivery jumped to a premium of over $100 an ounce above the global benchmark for gold spot prices in London.

The London Bullion Market Association, which represents banks and large institutional gold traders, said at the time that it was “seeking clarification” on the matter from US authorities.

Comex, meanwhile, is the world’s largest gold futures market, and futures on the platform are backed by gold bars shipped from Switzerland and other key trading and refining hubs. In particular, 1kg gold bars are the most common form traded on it.

The gains on futures in New York were later erased after President Trump posted that gold would not be subject to tariffs, reversing earlier expectations.

Tariffs Threaten Global Bullion Flows and Market Stability

As Trump reignited his global trade war by levying his reciprocal tariffs on almost every trading partner, there was widespread market speculation that Switzerland could be dealt a blow if the US imposed tariffs on imports of one-kilo bars. This is because Switzerland dominates the world’s refining industry.

Reports at the time suggested that exports from the country to the US could be hit by a 39% tariff, which would have been among the highest rates imposed by Trump. This rate was expected to cover certain imports of gold bars that were previously in a tariff-exempt category. As a result, markets anticipated imported gold would become more expensive for US buyers.

The Trump administration had repeatedly promised that there would be no exemptions in the president’s second-term tariffs, unlike his first four years in office, when such exemptions were seen as reducing their effectiveness.

Speculation over the removal of gold from exemption following a ruling letter, which is used to clarify the US trade policy and was first reported by the Financial Times. The letter, signed on July 31, stated that 1kg and 100-ounce cast bars were not exempt from tariffs because, while “used primarily to back contracts on the Commodity Exchange (Comex),” they are also “sold to jewelers or industrial consumers for manufacturing purposes.”

What’s worth noting here is that sales of precious metal from Switzerland to the US increased in the first quarter of 2025 as investors turned to the safety of gold amidst the uncertainty of potential tariffs.

According to the Swiss precious metals association, “the short-term impact that gold has had on the trade balance at the beginning of 2025, which was an exceptional situation created by the reaction of the US markets to uncertainty around upcoming tariffs, and the global geopolitical situation” could have contributed to concerns over a blanket 39% tariff on Swiss imports.

Such tariffs, if enacted, would have made it “economically unviable” to export gold cast productions to the US, stated the association, and would have negatively impacted the flow of physical gold around the world.

In Q1 of 2025, Switzerland actually exported a record $36 billion of bullion, which made up over two-thirds of the nation’s trade surplus with the US in that period. So, Switzerland sold more to the US than it bought from them.

“We are particularly concerned about the implications of the tariffs for the gold industry and the physical exchange of gold with the US, a longstanding and historical partner for Switzerland.”

– Christoph Wild, president of the Swiss Precious Metals Association

The central European country accounts for 70% of the world market in refining gold from mines and other sources into bars. Switzerland imports about 2,000 tonnes of gold annually, much of it from banks in London and New York, and later exports it as bars, which are seen as a safe haven investment during times of currency devaluation and market volatility.

Uncertainty in the US market led to Switzerland exporting about $61.5 billion worth of gold to the US in the 12 months to June. This uncertainty, in part due to Trump’s tariffs, created so much demand for gold bars that in May Costco had to cap the number of bars that could be bought in a day.

In reaction to the anticipated imposition of tariffs on Swiss bullion imports, gold advocate Peter Schiff took to X to share that this decision by the US government could cause major disruptions in the gold market. This, according to him, could “wreak havoc on the COMEX,” as shorts scramble to cover their positions to avoid the hefty duties on Swiss gold bars.

However, a couple of hours ago, President Trump posted that gold will not be subject to tariffs, reversing earlier market expectations and easing concerns over global bullion flows.

Political Risks That Can Impact Gold Prices

While gold offers a hedge against inflation, geopolitical risks, economic uncertainty, and stock market downturns, the safe haven isn’t without its own risks. One such threat is governments seizing people’s gold during times of crisis, with the most prominent example being the one that occurred in the US in 1933 during the great depression.

In April 1933, US President Franklin D. Roosevelt signed Executive Order 6102 forbidding “the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.”

The reason given for limiting gold ownership was that “hoarding” of gold was stalling economic growth and worsening the depression. At the time, gold was still used as the standard for its currency. The idea with the order, however, was to increase the money supply without any restrictions.

Per the executive order, people were required to deliver all their gold to the Fed for $20.67, well below market rates, with its violation punishable by a fine up to $10,000 and/or up to ten years in prison.

The US wasn’t alone in putting such limitations on its citizens. In 1959, Australia enacted a law that allowed the seizure of gold from private citizens. In 1966, the UK banned citizens from owning more than four gold coins and blocked the private import of gold.

While a directive to levy tariffs on imported gold bars is far different from outrightly banning ownership, it can certainly disrupt the functioning of the US futures contract. It can also bring sweeping implications for the precious metal around the world due to gold’s role as a global currency and financial asset.

The thing is, gold isn’t like other metals such as aluminum, steel, and copper, which have also been hit by Trump’s tariffs. 

“Gold is moved back and forth between central banks and reserves around the world. We never ever thought that it would be hit by a tariff.”

– Robert Gottlieb, a former precious metals trader and managing director at JPMorgan Chase & Co., told a media publication in reference to the bars.

The metal is not only used by individuals as a safe haven but also by central banks, which hold gold in reserves to diversify their foreign currency reserves. And tariffs on gold could affect its value.

It can also make the New York exchanges less appealing for the global market by raising serious questions about their ability to “offer a stable and trustworthy trading environment that offers the best price discovery,” said Ole Hansen, head of commodity strategy at Saxo Bank.

But the concern isn’t limited to just Wall Street but applies to the broader market as gold is also used to back financial contracts, in coins and jewelry, and sold as physical bars.

Not to mention, gold is used in electronics, computing, aerospace, medicine, dentistry, and many other chemical and industrial processes. It is continually researched to advance technology.

For instance, a recent study¹ by Penn State and Colorado State researchers found that specially engineered gold nanoclusters can work as scalable building blocks for quantum computers and ultra-sensitive sensors.

These tiny clusters, as per the study, exhibit quantum-friendly spin properties, opening the door for faster, more stable quantum devices.

“For the first time, we show that gold nanoclusters have the same key spin properties as the current state-of-the-art methods for quantum information systems,” said study lead Ken Knappenberger, who’s the department head and professor of chemistry in the Penn State Eberly College of Science. “Excitingly, we can also manipulate an important property called spin polarization in these clusters, which is usually fixed in a material. These clusters can be easily synthesized in relatively large quantities, making this work a promising proof-of-concept that gold clusters could be used to support a variety of quantum applications.”

So, if gold imports were to face steep tariffs, industries relying on gold for cutting-edge tech could see costs rise. This could have slowed down innovation in sectors like quantum computing, where even tiny quantities of high-purity gold are mission-critical.

Bitcoin’s (BTC +0.44%) Tariff-Free Advantage Over Gold

Unlike gold, the digital gold, i.e., Bitcoin, is a purely digital asset, which doesn’t share this vulnerability. It is unaffected by customs duties, shipping delays, materials sourcing, or supply chain disruptions.

Bitcoin is a decentralized digital currency that uses blockchain to record transactions and cryptography to secure them. It allows for the direct transfer of value without any intermediaries. 

What’s more is that it’s borderless. So, the crypto asset moves across borders fast and at low costs without tariffs or physical handling. Bitcoin is also not bound to geopolitics but rather to network rules and internet access.

The supply of Bitcoin, meanwhile, is capped at 21 million coins, with each BTC made up of 100 million satoshis.

With its decentralized nature, fixed supply, and high long-term returns, Bitcoin has become the “21st-century gold”, especially for the younger generations and in emerging economies dealing with high inflation, an unbanked population, and capital controls. 

On top of that, it is independent of any individual, corporation, or central bank decision, which helps attract buyers and even some governments for reserve purposes. Now, not being subject to customs duties should make it even more attractive to investors.

Expectations that gold would be subject to tariffs, which were later reversed by President Trump, were essentially making a case for Bitcoin, whose price jumped from $117k on Friday to above $122k on Monday.

Since then, BTC has pared some of those gains, and as of writing, it is trading around $120,000, down 2% from its $123K peak on July 14. The largest digital currency with a market cap of $2.38 trillion is currently up 27% YTD and 97% in the past year.

Bitcoin’s year-to-date gains are actually second to gold’s 30% gains, which were supported by the trade uncertainty and geopolitical turmoil this year.

However, if we zoom out and take a stock of its performance since the beginning, BTC is the clear winner. The cryptocurrency’s total returns since 2011 surpass gold’s by more than 300,000 times.

Bitcoin’s latest gains amid the tariff speculation came as Spot Bitcoin ETFs broke the four-day-long streak of outflows totaling $1.44 billion. Inflows in the past three days amounted to $773 million, as per data from Farside. With that, Spot Bitcoin ETFs are now holding $150.70 billion in total assets.

This investment vehicle was only approved by the US Securities and Exchange Commission (SEC) at the beginning of last year. And in this short period, everyone from institutions, hedge funds, and endowments to pension funds, sovereign wealth funds, and others has been gobbling up BTC like crazy.

Recently, Harvard Management Company also disclosed a $116 million position in BlackRock‘s (BLK -1.21%) IBIT. With this, the company that oversees the university’s $50 billion endowment has become one of the largest known BTC holders by a US university endowment. 

Bitcoin is even being explored by the US government to be added to its reserves as the nation’s debt balloons past $37 trillion.

Senator Cynthia Lummis has proposed funding the country’s BTC purchases for “strategic bitcoin reserve” with the US gold reserves, which are the largest in the world at 261.5 million ounces but are valued at a mere $11 billion by the Treasury due to using the historical price of just $42.22 per ounce.

On August 1, the Fed published a note, “Official Reserve Revaluations: The International Experience,” which details the likes of Germany and Italy monetizing their gold to raise funds without selling any physical gold and then using the proceeds for various purposes, including paying down debt.

This was by no means a plan to proceed with the Bitcoin Strategic Reserve, but it certainly shows that the officials are actively looking into it. 

Another major development for Bitcoin came in the form of President Trump signing an executive order to ease restrictions on the inclusion of alternative assets like cryptocurrency, along with private equity and real estate, in retirement accounts like 401(k)s, which are currently limited to mutual funds and other traditional investments. 

This can unlock as much as $12 trillion to crypto, another massive win for Bitcoin if it comes to fruition. 

Furthermore, Bitcoin is being adopted as a corporate treasury asset, with these companies amassing a BTC stockpile worth $113 billion.

“Bitcoin’s climb toward record highs is being supported by steady institutional inflows into corporate treasuries, US spot ETFs, and a shift in sentiment following new US tariffs on imported gold bars. With gold facing supply bottlenecks and policy risk, Bitcoin’s role as a borderless, tariff-free store of value is gaining traction among investors.”

– Rachael Lucas, a crypto analyst at BTC Markets

In the light of all this, Michael Saylor, founder and executive chairman of Strategy, reinstated his view that Bitcoin is “digital gold” while sharing how it is superior to physical gold.

Bitcoin, he noted, is “inherently free from trade restrictions,” offering a more efficient and secure alternative to gold for storing value. Its immutable nature, according to him, can provide a powerful solution to the growing complexities of international trade.

These policy scares potentially make holding physical commodities a risky venture, which could drive Bitcoin’s institutional adoption as a long-term asset, believes Saylor.

Bitcoin cannot be taxed like gold because it “lives in cyberspace, where there are no tariffs,” he said, and pointed out that, unlike gold, whose weight makes it costly, slow, and cumbersome to move, Bitcoin can be transferred seamlessly anywhere in minutes. Also, Bitcoin transactions can settle easily without logistical or political barriers.

Saylor’s strong conviction in Bitcoin has driven Strategy’s accumulation of 628,946 BTC, representing 2.99% of the asset’s total supply.

So, while centuries-old gold continues to be the dominant safe-haven asset, policy changes even when reversed, can make Bitcoin more attractive to investors. Combined with its price action, increased institutional interest, resiliency, and digital and decentralized nature amidst the macro and political factors, this could help solidify Bitcoin’s store of value status.

Click here to learn all about investing in Bitcoin (BTC).

Swipe to scroll →

References