Gold Set to Surge as Tariffs Fuel Inflation and US Dollar Weakens

Gold (XAUUSD) is building bullish momentum as global economic shifts intensify after President Trump’s tariffs. The introduction of tariffs is likely to heat inflation trends and weaken the US dollar. These forces may benefit the gold market and push prices to new record highs.

This article discusses recent macroeconomic and technical trends in gold using price action analysis and gold-to-silver ratio signals to assess the next move. The current consolidation in spot gold below $3,500 has created price compression. This setup could lead to a price surge if key resistance levels are breached.

Record Tariff Revenues Fuel Inflation Risks and Boost Gold’s Appeal

US tariff revenue surged above $27 billion in July, hitting a record high. Monthly receipts have soared since March 2025, when new tariffs began. The Treasury expects total tariff revenue to reach $308 billion this year. This rise shows a stronger push toward protectionist trade policies. These tariffs could reduce the expected $1.7 trillion budget deficit in 2026.

However, tariffs act like indirect taxes on consumers and businesses. They raise import costs, which leads to higher prices and fuels domestic inflation. This puts pressure on household budgets and company profits, and it can also force changes in monetary policy.

Gold tends to perform well in these situations. When inflation rises and policies become uncertain, investors turn to gold as a safe store of value.

Persistent Inflation Pressures Strengthen the Case for Gold

Gold prices are consolidating below the key resistance of $3,450 per ounce. A breakout above this resistance would trigger a fresh rally toward the $4,000 target by year-end. However, the true catalyst for this move lies in the deepening inflation risks.

Core PCE and Rate Dilemma Create a Bullish Setup for Gold

The chart below shows that the core PCE inflation has stayed above the 2.0% target for over 4 years. The Federal Reserve faces pressure to cut rates. However, cutting before inflation subsides could undermine credibility. This policy dilemma is considered bullish for gold. The loose policy in a high-inflation environment makes gold more attractive as a store of value.

On the other hand, the ISM Services Price Index surged to 69.9% in July, suggesting strong input cost inflation. This surge is due to the new tariffs that hit imports, making goods more expensive. Companies are already passing these costs to consumers, increasing the chance of a renewed CPI and PCE surge.

Tariffs and Consumer Expectations Fuel Price Pressures

Moreover, the consumer inflation expectations are shifting. The chart below shows that the US consumer inflation expectations for the year ahead have increased to 3.1% in July 2025. As inflation psychology builds, buyers accelerate purchases, creating demand-pull pressure. Gold thrives in such cycles as investors seek protection from eroding purchasing power.

Meanwhile, the federal deficit continues to widen. Heavy truck sales are a leading indicator of economic confidence. This indicator has dropped sharply, pointing to slowing business activity. This weak growth, paired with high deficits, creates a toxic mix of stagflation risk. In this environment, gold outperforms traditional financial assets.

The chart below shows the sticky Consumer Price Index trending higher. At the same time, July’s CPI came in just below expectations. An upward continuation is likely once tariffs take full effect. Many new duties began on August 8, and Trump’s 90-day pause on Chinese tariffs only delays the inflation threat.

On the other hand, producer prices spiked in July. The chart below shows that producer prices in the United States surged by 3.3% year-over-year in July 2025, surpassing forecasts of 2.5%. Moreover, prices rose 0.9% month-over-month, rebounding from a flat reading in June.

This marks the most significant monthly increase in producer prices since June 2022. These figures confirm input cost inflation, which typically leads to consumer price increases by several months. With sticky inflation, high deficits, and compounding tariff effects, gold remains a compelling hedge, setting the stage for another leg higher.

Falling Dollar Index Clears the Path for a Gold Breakout

The high inflation and deficits signal weakening confidence in the US dollar. As the Fed faces pressure to ease policy amid persistent inflation, the US Dollar Index could break below key support levels.

The chart below shows that the US Dollar Index has shown negative price action over the past few months and is now approaching long-term support near the 96 level. A break below this 96 region could trigger a sharp decline in the index, potentially fueling a strong surge in gold prices above the $3,500 mark.

If the decline continues below 96, the next significant support for the US Dollar Index lies around the 90 level.

Historical Growth Phases for Gold

The gold market has been trading higher over the past few decades and shows strong price momentum on the long-term charts. This momentum is observed on the quarterly chart below, which reveals that the first significant growth phase began in the 1970s and culminated in a peak at $873 in 1980.

This surge in gold prices from the 1970s was due to runaway inflation and economic instability. The US ended the gold standard in 1971, which weakened the dollar and boosted gold demand. Moreover, the oil shocks in 1973 and 1979 triggered global inflation. Interest rates increased sharply, but real returns stayed low. Therefore, investors rushed to gold as a hedge against currency debasement. On the other hand, political tensions and Cold War fears added safe-haven demand. As a result, gold soared from $35 in 1971 to a peak of $873 in 1980.

Following that peak, gold entered a prolonged consolidation period that lasted until the early 2000s, with a bottom formed around $252 in 1999. After this low, the market initiated a second primary growth phase in the 21st century, eventually reaching a new record high in 2025.

Technical Breakouts Support Long-Term Bullish Structure

The first growth cycle from the 1970s to 1980 and the consolidation from 1980 to 1999 formed a classic bull flag pattern. This bull flag was broken in the 2000s, setting gold into a long-term ascending channel that extends from the 1999 bottom to the present.

Within this channel, gold also formed a large cup and handle pattern between the 2011 high and the breakout in 2023. The neckline of this formation sits at the key $2,075 level. Once this level was broken, gold began a strong upward surge.

Currently, prices are approaching the midline of the ascending channel, which lies near the $3,500 level. This explains why gold has been consolidating below $3,500 for the past three months. The ongoing consolidation below this suggests price compression and signals the likelihood of further upside.

Based on the historical bullish patterns and structural breakout at $2,075, a confirmed move above $3,500 would likely trigger the next leg higher. The projected target from the resistance of the ascending channel points toward the $6,000 level.

The above discussion is supported by the quarterly chart below, which shows that the quarterly candles have remained consistently positive after the breakout in 2023. The price continues to break new highs with each passing quarter.

Based on this strong momentum, it is likely that gold prices will continue trending higher through 2025 and 2026, reaching new record levels. Spot gold formed an inverted head and shoulders pattern in 2015, establishing a major low at $1,046.46 per ounce.

Following this, the price developed a symmetrical broadening wedge pattern near a key support line. The breakout from this pattern occurred in 2023, triggering the strong rally. Based on this bullish structure, any corrections in the spot gold market are likely to be viewed as strong buying opportunities for long-term investors and short-term traders.

Current Price Consolidation and the Next Bullish Trigger Above $3,500

The monthly chart for spot gold shows that the recent consolidation from the 2020 highs to the breakout in 2023 has formed an inverted head and shoulders pattern, with the neckline at the $2,075 area. After the breakout from this neckline in 2023 and into 2024, the gold price has been consistently trading higher, producing new record highs.

The recent high in 2025 at $3,500, observed near the resistance on the quarterly chart, has led to a strong price consolidation between the $3,000 and $3,500 levels. After reaching this high in April 2025, gold has been consolidating within a tight range and has formed inside bar candles in May, June, and July.

Now, August appears to be trending toward a tipping point that could finalise the next move in gold. This setup also indicates that a break above the $3,500 level will initiate a strong surge in prices. This surge will result from the price compression developed during the past three months of consolidation. However, if the gold price continues to decline toward the $3,000 level, it will present a strong long-term buying opportunity for traders targeting the next bullish wave towards $4,000.

Gold-to-Silver Ratio Signals Bullish Outlook for Precious Metals

The gold-to-silver ratio has served as a reliable indicator for predicting tops and bottoms in the gold and silver markets. Historically, when the ratio peaks, it signals a bottom in silver prices and precedes a rally in gold.

Historical Peaks in the Gold-to-Silver Ratio Have Marked Key Turning Points

The chart below shows key peaks in the gold-to-silver ratio (XAU-XAG) throughout the 21st century. The first major peak occurred in June 2003, marking a significant bottom in silver (XAG) and the start of a long-term rally in gold. The second peak appeared during the 2008 financial crisis, again coinciding with a silver bottom and a strong upward move in gold. The most notable peak was recorded at 126.51 in March 2020. This peak confirmed another bottom in silver and triggered a sharp rally in gold.

Another technical peak formed in April 2025 at the critical resistance level of the ratio at 105.58. These three historical peaks have consistently marked turning points in the silver market and have led to bullish gold trends.

April 2025 Peak Suggests a Breakout in Gold and Silver Prices

When the ratio confirmed a peak in April 2025, gold reached a high of $3,500 while silver bottomed near the $30 region. This peak in the ratio once again triggered strong momentum in both assets. However, gold has not traded above its April 2025 peak.

However, the price compression discussed above suggests the market is building positive momentum to break higher. The rising demand for silver is expected to support a breakout in gold above the $3,500 level.

Therefore, the latest peak in the gold-to-silver ratio reinforces the historical pattern and suggests that both metals may continue their upward trajectory in the coming months.

The weekly chart for the gold-to-silver ratio shows that a peak formed at 105.58 aligns with the resistance of the ascending channel. The ratio now appears likely to trend lower. The immediate support lies at the lower boundary of the channel, around the 80–81 region.

A break below this support zone would confirm a strong top and could trigger a sharp decline in the gold-to-silver ratio. This drop will likely trigger a strong rally in silver prices toward the $50 level. At the same time, gold will break above the $3,500 mark.

Bottom Line

Gold is trading in a bullish phase. The introduction of tariffs by President Trump within this phase has increased the chances of a surge in gold prices. From a technical perspective, the gold market has been consolidating in May, June, and July. This consolidation has produced inside bars, which indicate price compression. The combination of price compression within a bullish structure and rising inflation creates a powerful environment for an upward breakout. A move above $3,500 could trigger a surge toward the $4,000 and $6,000 targets.

In addition, the gold-to-silver ratio supports the case for a gold rally. The April 2025 peak in the ratio signals a trend shift in favour of silver, which typically precedes gains in gold. Therefore, investors can consider buying gold on any correction from current levels. Strong support for buyers remains in the $3,000 to $3,100 zone.