Here are 5 factors that are mostly supportive for gold prices, according to State Street

State Street Global Advisors’ bull-case scenario for gold sees a 40% probability that the metal will trade as high as $3,400 in the second half of this year.

The gold market is benefitting from uncertainty tied to President Donald Trump’s tariff policies, but that’s only one of five key factors that may contribute to a rise in the precious metal to as much as $3,400 an ounce in the second half of this year — and potentially even higher in the years to come, according to a strategist at State Street Global Advisors.

Prices for gold have climbed around 22% so far this year. The most active, June gold futures contract settled at $3,226.30 an ounce on Comex Monday, easing back from a record-high finish of $3,244.60 an ounce Friday.

The major factors impacting gold appear to be mostly tailwinds — and “potentially structural tailwinds, if the global economic order is in the midst of realignment towards mercantilism and protectionism,” said Aakash Doshi, global head of strategy at State Street Global Advisors, in his latest market update, provided to MarketWatch on Monday.

Against that backdrop of mostly tailwind factors, State Street’s “bull-case scenario” for gold sees a 40% probability that prices for the precious metal will trade as high as $3,400 in the second half of this year. There’s also potential for a climb to $4,000 to $5,000 in the next few years “under certain macroeconomic conditions,” such as stagflation coupled with accelerated dedollarization, Doshi said.

He noted there are five “primary channels” impacting the gold market as U.S. economic policy “rapidly evolves.”

Trump’s tariffs provided a ‘significant layer of economic and macro uncertainty for investors that were already grappling with weakening consumer sentiment, a cautious [Federal Reserve] … and higher asset-market volatility in fits and starts throughout March.’

— Aakash Doshi, State Street Global Advisors

Doshi referred to the first of these channels as the “uncertainty premium.” The tariffs proposed by the Trump administration on April 2 provided a “significant layer of economic and macro uncertainty for investors that were already grappling with weakening consumer sentiment, a cautious [Federal Reserve] given lingering inflation risks and higher asset-market volatility in fits and starts throughout March,” he said.

Trump last week implemented a temporary pause on the tariffs hikes, with the exception of those on China. However, “economic and policy uncertainty remain elevated,” said Doshi, and “a rerating of U.S. growth exceptionalism and corporate earnings outlooks should buttress investor demand for gold as a safe-haven asset and portfolio overlay hedge.”

Doshi also pointed out the potential for an “acceleration of [the] dedollarization trend.”

“A global trade war could accelerate reserve-diversification trends that favor gold holdings from economies that end up recycling fewer U.S. dollars into U.S. sovereign assets,” he said.

“Market perception under a more protectionist and mercantilist world order is one that probably favors onshoring more gold reserves,” Doshi added, and that may be incentivizing gold traders to buy an asset that “could experience further demand growth from the most price-inelastic buyer — national governments — over time.”

There is also the risk of a economic downturn such as a recession or stagflation that can benefit gold. The precious metal tends to outperform during periods of financial-market stress, especially if there is a period of sustained “risk-off” sentiment, said Doshi.

A higher probability of U.S. stagflation, meanwhile, should support
gold investment demand, he noted, adding that a “slow-growth, high-inflation, weak-job-growth” environment was a key driver of the gold-price rally during the 1970s to early 1980s, “and might be especially bullish gold if it plays out in 2025/2026.”

Gold can also be used as a “volatility hedge,” said Doshi. It’s a “lower-volatility asset that is often strategically placed in portfolios to damp[en] impacts of equity unwinds,” he said, pointing out that gold has provided portfolio protection in March and April so far.

Finally, the last of the five primary channels impacting gold can be more of a negative headwind for gold prices, said Doshi, and that’s when the metal is used as a “globally liquid and fungible asset to raise cash and rebalance portfolios.”

Still, if gold continues to catch a bid during these liquidation episodes, over time there could be further confirmation of a new baseline price north of $3,000 an ounce, he said. Prices had traded below $3,000 earlier this month before ending last week at a record high.

Gold markets may face “occasional bouts of 5% [to] 7% draws” in high-volume environments but “overall, the price outlook leans more
bullish than bearish, and those dips are likely to be bought,” Doshi said.