Gold, for several reasons, is deemed to be one of the safest tools investors are poised to employ in times of economic hardship. It is a tangible asset, a physical commodity with inherent value; its scarcity preserves its value, and it maintains its purchasing power, therefore it is used to hedge against inflation. Central banks’ inclination to hold it as a reserve reinforces its credibility. During the 2007 – 2009 financial crisis, for example, it provided sanctuary as equities and oil went into freefall.

A similar phenomenon is observed today, as the global trade war intensifies and the fears of recession and even stagflation rise. The price of gold is on the ascent. In addition to central banks’ relentless buying spree, gold exchange-traded funds (ETFs) are experiencing significant inflows. It is a clear sign of expectations of lower yields on other assets due to the unpredictable investment climate precipitated by trade wars. As gold prices strengthen, stocks are sold off and oil is also on the back foot.

The price of gold has risen 20% this year (as of April 3, a day after the announcement of reciprocal U.S. trade tariffs on trading partners). WTI, the U.S. benchmark crude oil contract, has trended progressively lower. At the end of last year, one ounce of gold was worth 37 barrels of WTI. This ratio has ballooned to 45 barrels by the beginning of April.

The absolute and comparative strength of gold is a discernible indicator of the economic precariousness of 2025. Uncertainty, which characterizes the wider investment suit and the oil market, is mirrored in the inflated gold/oil ratio. The ratio remains high as long as adverse economic and demand growth concerns persist. It insinuates depressed oil prices. Only a prolonged retreat towards the historical average of around 30 – 35 would be seen as an unmistakable sign of brighter prospects and potentially tighter oil balance. For now, however, such optimism appears misplaced.