Key Takeaways:
- For gold investors, long-term volatility of markets is important to watch.
- Market analysis shows long-term volatility in spite of apparent resilience recently.
- Analyst urges consumers to be ready for anything.
- Gold’s ability to remain steady in the face of volatility leads major investment bank to encourage ownership of gold as a “standout asset”.
After recent reports of new tariffs and the release of inflation data, investors are watching gold and volatility in the long-term through market analysis by economic experts. According to analysts, volatility appears to remain, even after recent bouts of resilience suggest U.S. and global markets have built up a measure of immunity to the type of bad news that usually affects economies.
Some analysts clearly suggest that owning gold (including physical gold IRAs) could help some investors mitigate the volatility and its effects on savings portfolios, including those holding retirement savings.
(See more details in Augusta’s original full-length article—link at bottom of this page.)
Market Analysis: Muted Reaction to Tariffs Not the Whole Story
Chris Beauchamp, chief market analyst at IG, an online brokerage and investment platform, explained recent mild reactions of the market to tariff announcements this way:
Historical data shows that markets often overreact to initial tariff announcements… markets tend to stabilize once the actual economic impact becomes clearer, suggesting that initial reactions may be overstated.”[1]
In January, the U.S. Labor Department had announced increases in CPI and PPI to significantly higher levels than the Federal Reserve’s targeted 2%. At the time, this should have upset the markets, but it didn’t.
(Read full article to get details and expected effect on rate cuts in the foreseeable future. Link at bottom of this page.)
As time went on, consumer and price indexes (CPI and PPI) remained basically steady, which helped explain why price pressures were stubborn after economic measures that usually signal volatility and higher inflation.
Why is Market Resilience Not as Reliable as It Seems?
Barron’s reported that the recent CPI update, although it tested the market’s resilience, with stocks initially tumbling, the market ultimately logged a slight dip and “stayed above the key 6,000 level.”[2]
In spite of tariff announcements and unsettling inflation data, the S&P 500 and Dow Jones numbers were really essentially flat for the month and the Nasdaq was actually up almost two percent.
So the question is: Is everything really great right now? Or are the markets just choosing to “ignore” the market stress in anticipation of a quick resolution? If it’s the latter, investors could be taking chances if they act on market stability.
As MarketWatch’s Cam Hui put it, the equities market seems to be “ignoring its number one threat…that uncertainty over inflation, tariffs, political chaos and other unknowns could trigger a chaotic market downturn.”[3]
This article will examine Hui’s thoughts on the subject and also go over why some investors choose gold to fight volatility as a hedging diversified.
Why Are Investors Ignoring Market Volatility?
The long-term outsized risk that remains in place in spite of investors “ignoring” short-term worries is called “tail risk.” Hui says it is “increasingly disturbing” that investors are ignoring tail risk[3]—and this is different from what has happened in the past (and part of the reason it’s disturbing).
He urges investors to take a closer look at persistent inflation that dampened the Federal Reserve’s expectations of cutting interest rates in the near future. The market seems to be acting as if the risks, including the risk of a trade war, are nonexistent.
Featured Partners (Ad)
Market Analysis: “Bad at Pricing Binary Outcomes”
Hui pointed out how strange it was that even when the Ford Motor Co. CEO warned tariffs would “cause chaos for the auto industry,”[3] the market barely moved in response.
He repeated an assertion by George Pearkes that indicates one reason markets seem to do well even with bad economic news is that they are “really bad at pricing binary outcomes” until the outcomes actually materialize.[3] But Hui points out that by then it might be to late to protect portfolios.
Pearkes talks about the 2020 pandemic-triggered market instability as an example. (Augusta’s original full-length article expands on this. Link at bottom of this page.)
Hui points out that the stock market, in a similar way, didn’t react to the trade war of 2017–2018 “until it stared the news in the face.”[3]
Gold and Volatility: “Be Prepared for Anything”
As a result of this muted behavior of the markets, some analysts believe markets are now looking past particular economic and geopolitical events and instead are more heavily considering a broader outlook for longer-term growth.
Jeff Blazek and Erik Knutzen, co-chief investment officers at global asset manager Neuberger Berman, said their view is that, “…investors need to shift from an ‘inflation mindset’ to a ‘growth mindset’ to understand current dynamics.”[5]
Hui says this is evidence that investors should “be prepared for anything.”
Central banks appear to be doing just that with the help of gold. They have steadily increased their reserves of gold over the last three years and appear to be on track to do the same this year. They’ve been net purchasers of gold for the past 15 years.
The banks are probably doing this to lower their exposure to the dollar, according to numerous analysts, but it also may reduce their exposure to other economic risks such as trade wars and sanctions.
Gold, as a long-term store of value and inflation hedge, with positive performance during times of crisis and a lack of default risk, can serve as an effective portfolio diversifier.
Even J.P. Morgan recently said, “Gold is a standout asset to us.” (Read original full-length article for more examples of gold proponents.)
Some analysts are projecting gold could reach as high as $3,200 per ounce by the end of 2025.[7]
How to Add Gold to Retirement Portfolios
Individual investors who understand underlying economic volatility in spite of short-term market resilience may want to add gold to their portfolios to do what central banks and institutions are doing: protect against long-term uncertainty.
Physical gold can be held in a tax-advantage account called a “gold IRA,” a useful tool to mitigate the risks of underlying economic volatility—no matter how good things look according to short-term market analysis. Gold and volatility have a unique relationship that may be worth examining for many investors to help them weather the storm.
Read the full article on Augusta Precious Metals blog here.
[1] Chris Beauchamp, IG, “Why tariffs may not be the trade war trigger markets fear” (February 14, 2025, accessed 2/20/25).
[2] Barron’s, “Markets and Fed Shrug Off Inflation Fears. Why Trump Tariffs Could Change That and 5 Other Things to Know Today.” (February 13, 2025, accessed 2/20/25).
[3] Cam Hui, MarketWatch, “The stock market is ignoring what could be its No. 1 threat” (February 15, 2025, accessed 2/20/25).
[4] Liz Frazier, Forbes.com, “The Coronavirus Crash Of 2020, And The Investing Lesson It Taught Us” (February 11, 2025, accessed 2/20/25).
[5] Barbara Kollmeyer, Morningstar, “Last week showed the stock market has moved on from obsessing about inflation. Here’s the new playbook.” (February 18, 2025, accessed 2/20/25).
[6] Bloomberg.com, “Gold Remains ‘Standout Asset,’ JPMorgan’s Peters Says” (February 13, 2025, accessed 2/20/25).
[7] Yuxuan Tang and Stephen Jury, J.P. Morgan, “Is it a golden era for gold?” (January 3, 2025, accessed 2/20/25).
Featured Partners (Ad)
