Gold and Silver: Safe Haven or Overhyped as Summer Heats Up?

Gold and silver have been shining bright as the stock market fell off a cliff due to fears over the impact of Donald Trump’s wide-sweeping tariffs. Sure, the stock market was given a big break, rallying the most in decades, as investors learned of a 90-day tariff pause on all nations but China, which now faces 145% levies. With gold smashing past $3,260 per ounce and silver not too far off from its own highs while the stock and bond markets are stuck in limbo, it’s tough not to think about upping one’s gold and silver exposure, even if it means paying up a premium price tag.

Gold and silver have gained by an astounding 35% and 12%, respectively, over the past year. Meanwhile, the S&P 500 has gained 6% while the tech-heavy Nasdaq 100 is down more than 10%. The relative outperformance of the two precious metals is striking. And while the tides could turn if Trump delivers more clarity on tariffs while steering clear of the most devastating ones (that 145% tariff on China) that could propel the world economy into a recession (or worse), I still think it makes sense to expose a portfolio to gold, silver, or a mix of the two for the long haul.

At the end of the day, gold and silver are excellent portfolio diversifiers, especially for a time like this: when a global trade war threatens to sink the global economy into a man-made economic downturn. Of course, it’s a horrific time, with some pundits comparing the current environment to the Great Depression, which was worsened by the Smoot-Hawley tariff act. Indeed, Trump tariffs seem just as scary as the ones imposed way back in 1930.

Gold could shine brighter if tariffs send the economy into a downturn.

With former U.S. Treasury Secretary Janet Yellen saying the U.S. would be “lucky to skirt a recession,” it still seems like the only thing that will glitter in this market is gold, and maybe silver. Thus far, these precious metals have been a precious hedge for investors against the mounting macro turmoil as well as the weakness in the greenback. If a recession becomes unavoidable and tariffs weigh on the chance of a timely recovery, gold and silver may still have more gas in the tank.

As more investors crowd around the gold and silver trade, some folks may be on bubble watch. Indeed, it’s never a good idea to chase assets, especially those that one cannot value. With no dividends, cash flows, or fundamentals to go by, it’s pretty much impossible to tell what’s next for gold. That said, I don’t see a bubble, even after 60% gains in two years.

The last great hedge?

If the deep cut of tariffs gets felt, I see a sustainable path higher for gold. It’s been one of the best-performing assets since Trump pulled the curtain on his tariffs. And as they’re imposed, there’s really no telling how high gold could rise, as central banks look away from the U.S. dollar and towards bullion. Looking ahead, Goldman Sachs (NYSE:GS) thinks gold could hit the $3,700 mark by year-end. That’s a bold, but realistic call that could set the stage for $4,000 gold in 2026.

While gold and silver (the bullion, ETFs, mining stocks, and so on) aren’t without their fair share of risks at today’s euphoric all-time highs, I do view the asset as a great hedge against a catastrophic scenario with tariffs. If you’re overweight stocks and bonds, perhaps adding some gold can help improve upon the risk profile further. I’d argue it can’t hurt, even though a pullback could strike if tariffs are lifted. Of course, if tariffs are lifted, gold’s decline would probably be dwarfed by the swift gains likely to be enjoyed in the stock market.

Is gold overhyped going into summer?

Sure, as bullion flies off Costco shelves, a strong case could be made that there’s a gold rush of sorts as investors look to lowly correlated assets. However, just because an asset is hyped does not mean there’s a bubble and further gains can’t be had. The way I see it, gold is still a shining hedge to be leaned on in these trying times.

Higher tariffs on? Gold will shine. Tariffs off? Gold could lose its luster, but, at the very least, stocks could become great again.

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