Gold’s rally paused in May, but most of the underlying bullish factors remain in place and the risk is they escalate 

• As US President Donald Trump plays havoc with global trade there is a risk that other countries stand up to Trump and the currently dire situation deteriorates
• Gold prices have corrected by around ten percent, which seems orderly given the 116% gain since October 2023 
• Funds reduced their gross long position by 34% since it peaked in early-February, and shorts have started to cover into the recent price rebound. We are waiting to see when the funds start to buy again
• ETF investors have reduced holdings by less than one percent in recent weeks, but they still hold less gold today than when ETF holdings peaked in 2020, when prices were 43% lower
• Geopolitical risks remain elevated and the changes underway are not temporary - a new world order is forming and there are significant risks as this happens 

Is silver’s pent-up bullishness ready to be unleashed? 

• Silver prices set fresh highs for the year; investors may be ignoring weak industrial demand, instead seeing opportunity given silver’s underperformance

Silver’s time in the limelight lies ahead

Chinese interest in platinum jewellery has picked up, this could be a gamechanger for the metal. Palladium is in danger of being left behind 

• Supply fundamentals for both metals are tightening, but only platinum has the brighter demand outlook. That said, the auto industry faces fresh headwinds that could impact both metals

Platinum prices have rallied as Chinese interest in platinum jewellery has picked-up

Gold spent May consolidating, but was heading higher again as June got going 

Gold prices peaked at $3,500 per oz on April 22, they then spent the first half of May oscillating down to a low of $3,121.55 per oz, seen on May 15, before a rebound got underway. May was the first month this year that did not see gold prices set a fresh high, but with prices correcting 10.8% from the high, the market has had time to reset itself. While there has been some profit-taking and fund long liquidation, there was no rush to the exits by investors or speculators, which suggests the market is both orderly and not concerned about the bull run ending. Indeed, very little has changed, the structural issues the world faces are still in place, some have escalated, a few have de-escalated - but only temporarily it would seem, and some new ones have risen with the US Defense Secretary, Pete Hegseth, commenting about China’s ambitions over Taiwan, saying “The threat China poses is real, and it could be imminent…".

...a new world order is likely to emerge. If this happens, it is unlikely that the US dollar will remain the world's reserve currency for long.

Geopolitics getting worse

Geopolitical issues have been running high for several years, notably with Russia’s invasion of Ukraine, the Israeli/Middle East conflict, China’s more aggressive stance in the South China Sea and a host of conflicts in Africa, Syria, Yemen and Kashmir. The latter is particularly alarming given India and Pakistan are two nuclear-armed states. Indeed in this environment, globalisation is struggling to continue and as the world fragments once again into blocs, a new world order is being formed, but what will it look like? Former UK Foreign Secretary David Miliband said recently that “The problem is that it’s much more clear what we are inflecting from – a world in which the US was the anchor of the global system – but it’s not clear what we’re inflecting to”. In this uneasy environment, Trump’s trade wars with virtually everyone may just be the excuse aggressive leaders need to push ahead with their plans as the US has in effect ostracised most of its friends, the non-aligned countries, and the foreign entities of concern. With the United States indicating a desire to reduce its global role, other regional powers are likely to step in to fill the void. As a result, a new world order is likely to emerge. If this happens, it is unlikely that the US dollar will remain the world's reserve currency for long. This is something global markets are not prepared for, but it may be reflected in the rising value of gold and the weaker dollar. Taking this further - as any fade in the dollar’s power will likely take years, gold may well find itself underpinned for years as the structural change unfolds.

12 Jun 2025 | Categories: Gold, Silver, Dollar, US, Platinum, Palladium, UK

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