With US tariffs looming, ought to YOU spend money on gold?

The price of gold has been hitting record highs – for which Donald Trump is partly responsible.

The US President has always been a fan of gold: he likes the colour, and he likes the lustre.

But the principal reason why the gold price soared to $2,886 yesterday – a rise of more than 40 per cent over the past 12 months – was fear that Trump could impose tariffs on the import of bullion to the US, regardless of his abiding passion for the metal.

In response to such concerns, New York bullion traders have stockpiled about $82billion worth of supplies of gold, leading to scarcity.

As a result, there are waiting times of four to eight weeks to withdraw gold from the vaults of the Bank of England.

These conditions are causing even investors who cannot usually get excited about gold to wonder if they should put their trust in this metal as geopolitical tensions escalate and budget deficits grow ever wider.

Bullion has traditionally been seen as a safe haven in a troubled period of history. In the current era, some private investors view Bitcoin and other cryptocurrencies – which came on the scene in 2009 – as the best refuge from global dislocation. Crypto’s independence from government is one of its attractions for its enthusiasts.

Other investors, however, still prefer gold, first used for trading in 1500 BC, but also perceived to be independent of governments.

Meanwhile, central banks, particularly those of emerging nations not enamoured of the US, have also been buying, rather than commit funds to the dollar in a trend that has been dubbed ‘de-dollarisation’.

Duncan MacInnes, manager of the Ruffer investment trust, comments: ‘Gold is the most time-tested preserver of wealth that we know. A fine Roman toga cost an ounce of gold. Today, that same ounce could buy you (most of) a Savile Row suit.’

He adds: ‘Gold is a useful diversifier because it protects and works at moments when your other assets will struggle, such as times of crisis, inflation or war.’

Another spur to gold’s popularity is apprehension about the febrile mood of the stock market.

This week, Trump’s brief imposition of tariffs on imports to the US from Canada and Mexico caused tumult.

Last week, the emergence of DeepSeek, a low-cost Chinese artificial intelligence (AI) system, also temporarily wreaked havoc among tech stocks which are splashing out billions in the hope that AI will be the biggest gold rush ever.

Such volatility seems likely to persist, meaning that investors who are not turned on by turbulence may start to remember the adage that having 2-5 per cent of gold in your portfolio makes a certain amount of sense.

Against this background, Bank of America forecasts that gold will reach $3,000 this year, as the US deficit continues to expand. Goldman Sachs has reiterated its call to ‘go long gold’, although this bank now says that the price may not reach $3,000 until next year, rather than by Christmas.

This may reflect the opinion that people who have made a mint in gold could be preparing to take profits. MacInnes, who considers gold to be expensive at its current level, senses that the price may be subject to a ‘tug of war’. The bursting of the crypto bubble – Bitcoin’s price has soared by 130 per cent over the past 12 months – and a resurgence of inflation would be positives.

There could also be upward pressure on gold price if Trump decides to interfere with the independence of the Federal Reserve, the US central bank.

The relationship between Trump and the Fed chairman Jerome Powell is somewhat strained over the President’s calls for deep cuts to US interest rates. But, confusingly, Trump praised Powell over last week’s Fed decision to keep rates on hold. Should you be going for gold? Here’s what you need to know.

The real thing

One disincentive to going for gold is the lack of income although, amid expectations that interest rates could go down, the opportunity cost of holding a non-yielding asset tends to lessen. If you are drawn to the idea of owning physical gold, with its indefinable age-old allure, you will face issues such as insurance and storage. Are you happy to install a safe at home, or pay the cost of storage in a bullion dealer’s facility?

But if the feeling of reassurance overcomes such considerations, the Royal Mint and the bullion dealer Sharps Pixley offer a range of bars and coins. The 1kg bar at Sharps Pixley will set you back £74,484.

A rather more portable King Charles III 2025 sovereign is priced at £560. The Royal Mint’s Digital Gold scheme allows you to make a flutter on gold without security responsibilities. A £25 stake buys you 0.010 of an ounce of gold.

Mine the opportunities

If the real thing seems impractical, there are exchange traded funds (ETFs) which hold bullion. Tom Stevenson, of Fidelity, likes iShares Physical Gold – which invests only in bars that meet that London Bullion Market Association (LBMA) criteria for responsibly sourced gold.

Other fund options include Amundi Physical Gold, Invesco Physical Gold and Xtrackers IE Physical Gold.

Another route into bullion is through gold-mining companies which should, in theory, benefit when the gold price is moving upwards. This week JP Morgan named Fresnillo as its top pick from the sector. Shares in the group, which mines gold and silver in Mexico, have jumped by 23 per cent this year to 751p.

If you are exploring this sector, tread carefully, however, as an increased gold price does not necessarily guarantee glittering profits, especially as finding and financing a mine is becoming more challenging, with environmental permits hard to secure.

Vincenzo Vedda, chief investment officer of asset manager DWS, suggests that investors focus on ‘mine operators that are not only established but have already invested in securing future production, with a track record of cost control and consistent performance’.

Given the difficulty of establishing such credentials, why not look at one of the funds that back gold mining shares. Baker Steel Gold & Precious Metals, BlackRock Gold & General, Jupiter Gold & Silver and Ninety One Global Gold delivered returns of 17.4 per cent, 16.6 per cent, 17.3 per cent and 16.9 per cent last month. Ninety One Global Gold is FundCalibre’s best buy fund. AJ Bell likes BlackRock Gold & General.

Add some sparkle

Capital protection funds trusts, such as Capital Gearing, Personal Assets, Ruffer and Troy Trojan – which aim to deliver an element of wealth preservation – give a small amount of exposure to gold.

Ruffer, my choice of capital protection fund, does not own any physical gold. Instead, 5 per cent of the portfolio is invested in gold mining shares.

You may be sceptical about the prospects for gold, despite the demand from central banks and lovers of jewellery. But the success of the generative AI gold rush taking place in California depends on the commodity discovered in this state in the 1840s.

Gold is used in the microchips, the processors and all the other kit required to build not only the best-known generative AI system – Chat GPT – but also the Chinese interloper DeepSeek.

Gold is also deployed in the vast data centres that enable the ‘training’ of these systems.

It is another hugely significant moment in extraordinary history of this metal – a development which it could be risky to ignore.