Why does gold repeatedly hit record highs?

Source: Barren Chinese

Everything is related to the trade war initiated by Trump.

Concerns over the tariff issue have made many investors uneasy, but gold bulls are benefiting from the uncertainty brought by U.S. President Trump’s tariff threats.

Gold has risen by about 8.5% this year, with the current price close to $2900 per ounce. In 2024, the gold price rose by nearly 30%.

The performance of gold mining stocks is even better than that of gold. The VanEck Gold Miners ETF, which includes gold mining stocks such as Newmont NEM, Agnico Eagle Mines AEM, and Barrick Gold GOLD, has risen by more than 18% so far this year.

After a significant increase in 2024, gold has seen considerable gains this year. It is prudent to remain cautious, but it is worth noting that if the price of gold continues to rise, gold mining stocks are likely to have even greater upside potential.

The current rise in gold has been driven by both central bank purchases and individual investor purchases. Data released by the World Gold Council(World Gold Council) at the end of last year showed that Poland, Turkey, India, and China have been major buyers of gold.

(Joe Cavatoni) Joe Cavatoni, senior market strategist at the World Gold Council, said in an interview with Barron’s: "Emerging market central banks are active buyers of gold, and they will continue to buy. ”

The World Gold Council said in a report released on Wednesday, February 5th, that gold demand in the fourth quarter of last year reached a quarterly high, with a very promising demand outlook for 2025.

The World Gold Council pointed out in the report that “central banks and ETF investors around the world will continue to drive demand growth in the situation where economic uncertainty supports the role of gold as a risk hedging tool.”

All of this is related to the trade war initiated by Trump. The continuous rise of gold has some peculiarities, as it is rising while the US dollar is also strengthening.

Kinesis Money market analyst Frank Watson(Frank Watson) pointed out that the rise of the US dollar is usually a bearish factor for gold priced in US dollars. However, the US tariff policy brings a lot of uncertainty to the economy and inflation, so the attractiveness of gold as a safe haven tool has not weakened. In other words, the impact of Trump’s trade policy may outweigh the impact of a strong US dollar on gold.

The silver price has also been rising, up about 14% so far this year. Alex Ebkarian, Chief Operating Officer of physical precious metal trader Allegiance Gold, pointed out in an email to Barron’s that due to uncertainties in the market, gold and silver prices may continue to rise.

Trends in Gold and Silver Prices from February 2024 to February 2025

Blue: Silver

Black: Gold

Note: Data as of 20:29 on February 5, 2025 Eastern Time; Source: FactSet

Erik Hagar said, “In high-risk environments, the appeal of physical gold and silver becomes more prominent because they can eliminate counterparty risk(counterparty risk), and are reliable stores of value.” He also pointed out that JPMorgan Chase(JPMorgan Chase) recently planned to deliver gold bars worth about $4 billion, “apparently as a hedge against potential trade disruptions.”

As for how much the gold price can rise, Michael Arone, chief investment strategist of State Street’s SPDR Business, believes that, influenced by the global situation, the price of gold may break through $3000 per ounce at some point this year.

In the research report, Alonne wrote, “Geopolitical risks as well as structural changes in currency and fiscal policies will also boost the prospects of gold. Central banks around the world will continue to buy gold this year, supporting the gold price. All of these may eventually release some suppressed investment demand.”

This is also good news for gold mining stocks. Although gold mining stocks have risen significantly this year, their valuations are still reasonable. The 2025 expected P/E ratio of the VanEck Gold Miners ETF is only 12 times, lower than the 5-year average level of 15 times. The P/E ratio of this ETF is also about 45% lower than the S&P 500 index, and its P/E ratio is usually 20% lower than the market.