Ali Canberk Ozbugutu, Mahmut Cil, and Emir Yildirim
22 April 2025•Update: 25 April 2025
ISTANBUL
President Donald Trump’s protectionist trade policies have led gold prices to rise because of constant uncertainties and tensions, breaking the negative correlation between gold and US real interest rates, an expert told Anadolu.
Hande Sekerci, chief economist at Türkiye-based IS Portfoy, said gold prices ordinarily move inversely, also known as negatively correlated, against US real interest rates, while gold has been moving upwards, reaching $3,500 per ounce on Tuesday.
Since his sweeping victory in the presidential elections, Trump’s second term has brought an atmosphere of uncertainties, with immigration restrictions, tariffs and tax cuts for the rich, thereby dampening the risk appetite in the markets.
At the same time, gold continued breaking records with the safe-haven demand of investors and central banks.
Sekerci said the consecutive record-breaking prices of gold should “normally move inversely to the US real interest rate,” and when real interest rates are expected to fall, gold is anticipated to rise, and vice versa. “For a long time, gold broke this correlation and became a precious metal that can gain support from constant uncertainties.”
She emphasized that geopolitical risks, such as the war in Ukraine and tensions in the Middle East, contributed to gold’s rise, which she said is “normal” for gold to gain value from, while its functionality in industrial fields also gave rise to the price despite not being as intensively used as copper.
“Nowadays, about 7% to 7.5% (of gold) is used in tech sectors, while 45% is used in jewelry,” she said. “Demand from India, China, and the Middle East is considerable, as well as central banks -- since the 2008 financial crisis, gold’s position as a reserve asset gained significance from central banks.”
Sekerci noted that gold’s upward trend can continue for a longer period due to ongoing risks and uncertainties, noting that “gold creates its own trend while institutions raise their price estimates, which in turn creates its own demand.”
“When we look at the fundamental analysis, we can say that while the Fed will cut rates, it seems unwilling to do so -- we need to monitor the developments but it seems like this upward trend in gold may continue, fueled by uncertainties,” she added.
Sekerci said concerns about the slowdown of economic growth in the US affected the markets after Trump’s tariffs were announced, while the Fed appeared less in favor of policy easing, as bond yields fell at the time but some recovery has been seen with changes to trade policies, such as Trump’s 90-day tariff pause.
She emphasized that the nominal amount of US bonds other countries hold is around $8 trillion to $8.5 trillion, noting that China holds approximately $800 billion of the total.
“While Japan is known to be the largest bondholder, the US administration deems China’s move to dispose of its US bonds not to be very impactful on bond interest rates to the extent of creating a serious volatility,” she said. “There really is a trade war against China, so the developments are very interesting in general, but I don’t believe China alone can impact bonds.”
Sekerci mentioned that the long-term side of the yield curve in the US bond market is safer in this period, while short-term risks come to the fore. She noted that inflation in the US remained a little more moderate as of the latest data, though it is still unclear how the Fed will react.
“This situation is likely to lead to much more volatility in the short term and I think it’s difficult for volatility to ease before the tariff uncertainties disappear and the course of inflation is fully clear,” she added.
