- Gold hits a new all-time high of USD2,817/oz on 31 Jan 2025 on tariff fears
- At the same time, elevated global uncertainties in the Trump 2.0 era have provided downside resilience for gold
- Rising US fiscal deficit and global fragmentation add to gold’s long-term appeal
- Outlook for gold remains positive on balance; maintain TP of USD2,835/oz
Tariff fears see gold stockpiling in New York. Gold hit a fresh all-time high of USD2,817/oz on 31 Jan 2025 against a backdrop of heightened global uncertainty. The immediate catalyst for this rally was fear around trade tariffs, specifically the possibility that bullion, which has historically been exempt from import duties, might be taxed in the future. This has resulted in a stockpiling of gold on COMEX, the New York commodity exchange – since the US election in November last year, inventory levels have risen 75% to reach c.31mn troy ounces, or USD86.6bn at current market price. Additionally, the recent DeepSeek-driven sell-off in the equities space likely contributed to risk-off fund flows into safe haven assets, of which gold is one. We have called for a gold positive environment since Trump’s victory in our CIO Perspectives article titled “Trump 2.0 – Winners & Losers” (published 7 Nov 2024), highlighting policy uncertainties as a supporting factor for the asset class, and this call has played out to a tee. Notably, despite considerable dollar and rates strength since October last year, gold has remained remarkably resilient due to elevated uncertainty in the macro environment.
Structural tailwinds intact. In addition to the immediate catalysts mentioned above, the long-term tailwinds highlighted in our latest CIO Insights chapter on gold (Alternatives 1Q25: Gold – Resilience with Alternatives) remain intact. Chief among them is the growing US fiscal deficit. Under Trump, expansionary policies such as tax cuts, increased fiscal spending, and de-regulation are expected to take place, and this will likely exacerbate the US fiscal deficit and prompt an expansion of liquidity in the future which is positive for gold from a monetary debasement angle. Additionally, the world is expected to become more fragmented from a geopolitical perspective under Trump 2.0, and that will continue to drive central bank demand for gold, especially among the BRICs+ nations, which view bullion as their biggest alternative to the dollar. It is also worth noting that while hedging against de-dollarisation used to be predominantly a central bank concern, more investor classes are beginning to see the merits of buying gold as a hedge against dollar and monetary debasement risk. To summarise, fiscal expansion in the US and growing global fragmentation will continue to strengthen the appeal of gold in the long term.
Structurally bullish on gold. In the short term, there are uncertainties surrounding gold’s outlook; bouts of dollar and rate strength, especially in response to tariff announcements, can potentially weigh down on gold prices. However, as the past three months have shown, the heightened volatility from Trump 2.0 can just as easily buoy safe haven demand for bullion. In the longer term, there will continue to be upward pressure on gold prices as the debasement trade chugs on. On balance, the outlook for gold remains positive and we continue to advocate for clients to hold gold in their portfolios for its upside potential as well as its risk diversification properties due to its low correlation with public bonds and equities.
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