Trump’s Tariff Reversal Weighs on Gold, Fuels Bitcoin Volatility

• Trump’s cancellation of EU tariffs quickly shifted money from gold into risk assets.
• Gold and silver fell fast, showing that safe havens can also reverse suddenly.
• Bitcoin whipsawed on tariff news, triggering major liquidations for both longs and shorts

A sudden reversal in US trade policy jolted global markets this week, hitting precious metals hard while sending cryptocurrencies through another round of sharp swings. After briefly signaling new tariffs on European allies, US President Donald Trump abruptly walked back on the threat, forcing investors to quickly reassess risk across asset classes.

Gold fell more than 2% from its recent peak, while silver dropped nearly 5%, wiping out gains built during the tariff scare. 

From Tariff Fear to Market Whiplash

The turbulence began over the weekend when the administration floated tariffs of 10% to 25% on European partners, a move tied to broader geopolitical talks involving Greenland. When markets reopened, selling pressure was immediate. Equities slid, the S&P 500 erased its early-year gains, and Bitcoin fell below $90,000 as traders rushed to cut risk.

As uncertainty deepened, money flowed into gold and silver in a classic flight to safety. That rally proved short-lived. On Wednesday, January 21, the White House said the tariffs would not proceed, citing a newly agreed “security framework.” The sudden reversal sent precious metals sharply downwards within hours.

Bitcoin’s Billion-Dollar Liquidation Day

Bitcoin climbed from about $88,000 to $90,500, triggering large short liquidations. The move quickly reversed, with prices sliding to near $87,300 and wiping out leveraged long positions. After confirmation that tariffs were canceled, Bitcoin rallied again toward $90,500, setting off another wave of short liquidations. By the end of a 24-hour period, total liquidations across the crypto market were around $1 billion.

Why Gold Leads and Bitcoin Follows

Macro investor Raoul Pal says gold closely tracks financial conditions such as interest rates, the dollar, and liquidity. As debt and interest costs rise, gold often reacts first, acting as an early signal. Bitcoin typically lags, responding later as liquidity improves, which is why major crypto rallies often appear toward the end of easing cycles.

Macro Signals and Bitcoin–Gold Divergence

Analysts say the next few days could be decisive. Crypto analyst Michael van de Poppe points to a strong inverse relationship between Bitcoin and gold. 

“Bitcoin needs to break back above both the 21-Day and 50-Day MAs. If those break and the Japanese Bank steps in, bear in mind that Gold can drop like a stone during that done and Bitcoin could see a strong 4-6% move upwards,” he said.

Beyond near-term volatility, political signals from Washington are supportive. Speaking at the World Economic Forum, Trump said he hopes to sign crypto market structure legislation soon, as lawmakers advance a bill expanding the role of the Commodity Futures Trading Commission, reinforcing crypto’s growing role in global finance.

Related: Trump Signals Quick Move on CLARITY Act as Bitcoin Holds Near $90K