Gold continued to set new highs in February

Key Takeaways

Gold’s rally continued into February and bullish sentiment seems robust given the price pullback in late- February was short-lived
Indeed some of the previous bearish factors that were present earlier in the year have become supporting factors for gold, mainly the dollar and US treasury yields have weakened
Trump’s unpredictable nature and policy decisions are creating increasing uncertainty, which are worrying foreign governments and investors alike...
...this is likely to encourage further diversification away from the US, the dollar and treasuries, which should increase demand for gold
Trump is in danger of trying to do too much in too short a space of time as he only focuses on trying to Make America Great Again – there is a risk this backfires on the US
Most of the bullish factors supporting gold are unlikely to go away any time soon, indeed they are likely to increase, such as high global debt, de-dollarisation and heightened geopolitical risks
Silver is well placed to outperform gold, especially if industrial production starts to increase, which it may do as China stimulates its economy and Europe boosts military spending. The gold / silver ratio is high at 1:90, a drop in the ratio would favour silver
PGM prices have weakened as US tariffs look set to be another headwind for the US auto demand, but low PGM prices may prompt production cuts

Gold continued to set new highs in February, and the price dip was both limited and short-lived – sentiment remains robust

More factors that tend to influence gold prices have turned bullish, including the US dollar and US treasury yields that have both weakened...

...these have joined the already bullish trends in investment and central bank buying
Geopolitical risks have increased as it seems US foreign policy is siding more with Russia than it is with Europe and it has turned decidedly anti-Ukraine
While Trump’s tariffs and his desire to cut taxes and increase the federal deficit are likely inflationary, the market is still betting that the Federal Reserve will cut interest

Gold’s rally continued into February and bullish sentiment seems robust given the price pullback in late February was short-lived

Silver continues to follow gold’s lead, but it has yet to set fresh record highs

The medium-term outlook for silver is stronger, but it needs either more investors to get on board, or for industrial demand to pick-up rates this year – does this mean investors think Trump’s policies will lead to a recession?
While market sentiment remains bullish for gold, there is a risk that Trump’s policies prompt a broad market correction. Such a development could prompt gold prices to sell off as investors look to raise money for margin calls...
...the secondary reaction could be bullish for gold as more investors then move into safe-havens

Silver is well placed to outperform gold, especially if industrial production starts to increase, which it may do as China stimulates its economy and Europe boosts military spending

PGM prices weakened in February as tariffs look set to raise the cost of vehicles in the US, which is likely to weaken demand for auto-catalysts

Low PGM prices increase the chances of production cuts which would support the fundamentals

London gold prices set a fresh record high in February at $2,956.15 per oz, a rise of 12.6% from the end of 2024, while April gold prices on the CME climbed to a high of $2,974 per oz, but showed the same percentage rise as London gold.

The CME premium comprises the contango to the forward date, (the CME April contract against London spot price) as well as the premium that has emerged on the back of the worry that broad based tariffs on gold imports may be introduced by the US.

After spot prices peaked on February 24, they fell to a low of $2,832.70 per oz on February 28, but were on the rise again in early March, suggesting dips are being well supported.

CHART 1

CHART 2: Gold – Fund long, short and net position on Comex

Apart from funds most factors still bullish

The main bullish factor in the market is the uncertainty that comes with US President Donald Trump’s leadership and policies. Unsurprisingly, this uncertainty increases the risks the world now faces, and that has to varying degrees unnerved some markets. This in turn has increased demand for safe-havens, which is benefiting gold, but for gold bulls it may be a case of ‘be careful what you wish for’. Indeed, US equity markets have already turned lower, with the Dow Jones Industrial Average down by 5.7% from its December high, while investors have increased their buying of gold ETFs, suggesting some possible rotation out of equities into gold.

In addition, the US dollar and US treasury yields have started to weaken, both probably due to weaker US economic data that has led investors to factor in the Federal Reserve cutting interest rates by 50 basis points this year, compared with earlier expectations for 40 basis points. The Dollar Index had fallen to 105 by early-March, down from December’s peak around 110 and US ten-year treasury yields had fallen to 4.16% in early-March, from a high of 4.79% in January. Interestingly, Trump’s tariffs and tax cut policies are thought likely to be inflationary, but the market still expects the Fed to cut interest rates! This suggests that investors are more worried about the tariffs causing a recession, which would negate the need to raise interest rates to counter inflation.

10 Mar 2025 | Categories: Gold, Silver, China, Dollar, US, Platinum, Palladium, UK

Gold continued to set new highs in February

Key Takeaways