Author: Xiao Yanyan, Jinshi Data
As the bulls have seized on the economic uncertainty brought about by the US import tariff plan, gold prices have entered uncharted territory, but behind the assault on the $3,000 per ounce record, there are also those sowing some bearish signals.
Gold got off to a strong start in 2025, breaking records 8 times, and as of February 11, the gain exceeded 10%. Prior to that, in 2024, due to strong central bank purchases, geopolitical uncertainty, and loose monetary policy, gold prices recorded the largest annual gain in 14 years.
The newly elected US President Trump, disregarding the risk of triggering a trade war, has instead turned to imposing tariffs to help the struggling US domestic industry, further enhancing the appeal of gold as a safe haven.
This week, when Trump raised steel and aluminum tariffs, spot GOLD hit a record high of $2,942.70 per ounce.
Metals Focus general manager Philip Newman said, "What we're seeing is a shift in the motivation for safe-haven buying - from being driven by Middle East uncertainty to the threat and implementation of tariffs."
The rise last year began before the Federal Reserve started cutting rates, its magnitude was unexpected, and investors were clearly willing to ignore the opportunity cost of holding zero-yielding GOLD. GOLD also often ignores other typically adverse factors such as a stronger dollar.
Independent analyst Ross Norman said, "It's astonishing that GOLD has rebounded as inflation has eased, and all our understanding of GOLD's performance seems to have been challenged."
Due to concerns that Trump's tariff plan could impact GOLD supply in the US, GOLD bulls have become more emboldened.
As a result, the premium of the most active US GOLD futures contract over the London spot price has seen violent fluctuations, a premium that has historically only been a few dollars, but expanded to $40 per ounce before Trump's inauguration on January 20, and exceeded $60 during the inauguration period.
Market participants are trying to capitalize on profitable arbitrage opportunities, or to cover their existing positions on Comex, and the premium has attracted a large amount of GOLD delivery to Comex inventories. Since late November last year, Comex's GOLD inventories have surged by 18.6 million ounces, worth $54 billion.
As participants in the GOLD and silver markets in London, the world's largest over-the-counter GOLD trading center, are eager to borrow GOLD from the Bank of England's vaults, the waiting time to obtain GOLD from the Bank of England has increased sharply. Switzerland and Asia-centric GOLD hubs have seen a surge in GOLD supply to the US, and GOLD lease rates in London and India have also soared.
But by this Tuesday, the Comex premium had narrowed to $28 per ounce, and even as GOLD continues to flow into Comex inventories on the way, traders and analysts expect this activity to gradually subside.
World Gold Council senior market strategist John Reade said, "After the surge in GOLD imports into New York, the disconnect between New York futures prices and the London over-the-counter market seems poised to come to an end. The queue to withdraw GOLD from the Bank of England vaults should diminish in the coming weeks, helping to alleviate the pronounced liquidity shortage in the London market."
MKS PAMP SA head of metals strategy Nicky Shiels said that while prices may break through $3,200, as the physical GOLD dislocation issue is resolved by tariffs and potential structural changes (including a reversal of the decline in risk appetite, participation and liquidity), GOLD is becoming increasingly bearish.
She said her firm's average price forecast for 2025 will remain at $2,750, with no intention to revise it upwards, "if anything, the recent structural developments have strengthened the reasons for being bearish on GOLD."
Jewelry demand has been suppressed by the high GOLD prices, with discounts appearing in major markets like India, further indicating that the rally may slow further once the tariff situation becomes clearer.
Richemont, the maker of Cartier, said in November that it had to be "extremely cautious" in passing on soaring GOLD prices in the pricing of watches and jewelry.
According to Bank of America Securities, if local currencies weaken due to US tariffs, emerging market central banks may reduce their GOLD purchases.
GOLD exchange-traded funds (ETFs) backed by physical GOLD have also been relatively calm, with inflows in Europe in January but outflows in North America.
From a technical perspective, GOLD has been in the overbought area of the relative strength index since early February.
GOLD may encounter strong resistance around the $3,000 per ounce milestone - last year, GOLD teetered above that level multiple times before decisively breaking through the $2,000 mark.
