Source: Barron's Chinese
Everything is related to the trade war initiated by Trump.
The concerns raised by the tariff issue have made many investors uneasy, but gold bulls are enjoying the huge uncertainty brought by the tariff threats of US President Trump.
Gold has risen about 8.5% this year, and the current price is close to $2,900 per ounce. In 2024, the gold price has risen nearly 30%.
The performance of gold mining stocks has been even better than gold. The VanEck Gold Miners ETF (GDX), which includes gold mining stocks such as NEWMONT (NEM), Agnico Eagle Mines (AEM) and Barrick Gold (GOLD), has risen more than 18% so far this year.
After the sharp rise in 2024, gold has seen a considerable increase this year, and it is a relatively prudent approach to remain vigilant, but it is worth noting that if the gold price continues to rise, gold mining stocks are likely to have even greater upside potential.
This round of gold price increase has been driven by both central bank buying and retail investor buying. Data released by the World Gold Council at the end of last year showed that Poland, Turkey, India and China have been major buyers of gold.
Joe Cavatoni, Senior Market Strategist at the World Gold Council, told Barron's in an interview that "emerging market central banks are active buyers of gold, and they will continue to buy."
In a report released on Wednesday (February 5), the World Gold Council said that gold demand in the fourth quarter of last year hit a quarterly high, and the outlook for demand in 2025 is very good.
The World Gold Council report pointed out that "with economic uncertainty supporting gold's role as a hedge against risk, central banks and ETF investors will continue to drive demand growth."
All of this is related to the trade war initiated by Trump. The sustained rise in gold has some unusual aspects, as it is occurring at a time when the US dollar is also strengthening.
Frank Watson, a market analyst at Kinesis Money, pointed out that the rise of the US dollar "is usually a bearish factor for gold priced in US dollars", but "the US tariff policy has brought a lot of uncertainty to the economy and inflation, so the appeal of gold as a hedge against risk has not diminished." In other words, the impact of Trump's trade policy may outweigh the impact of a strong US dollar on gold.
Silver prices have also been rising, up about 14% so far this year. Alex Ebkarian, Chief Operating Officer of physical precious metals trader Allegiance Gold, said in an email to Barron's that due to the uncertainty in the market, gold and silver prices may continue to rise.
Gold and Silver Price Trends from February 2024 to February 2025
Blue: Silver
Black: Gold
Note: Data as of 8:29 pm Eastern Time on February 5, 2025;Source: FactSet
Ebkarian said, "In a high-risk environment, the appeal of physical gold and silver becomes more pronounced, as they can eliminate counterparty risk and are reliable stores of value." He also pointed out that JPMorgan Chase's recent plan to deliver about $4 billion in gold bars "is obviously a hedge against potential trade disruptions."
As for how much further gold prices can rise, Michael Arone, Chief Investment Strategist at SPDR Business, a subsidiary of State Street, believes that gold prices could break through $3,000 per ounce at some point this year due to global conditions.
In his research report, Arone wrote that "geopolitical risks as well as structural shifts in monetary and fiscal policies will also boost the outlook for gold. Central banks will continue to buy gold this year, providing support for gold prices. All of this could eventually unleash some pent-up investment demand."
This is also good news for gold mining stocks. Although gold mining stocks have risen sharply this year, their valuations are still reasonable. The 2025 expected price-to-earnings ratio of the VanEck Gold Miners ETF is only 12 times, lower than the 5-year average of 15 times. The price-to-earnings ratio of this ETF is also about 45% lower than the S&P 500 index, while it is typically 20% lower than the broader market.
