Gold remain supported during this uncertainty period, along with high demand from central banks, expectation of Fed cuts as well as geopolitical events.

Gold: Remain supported

Investors on edge by the growing global trade war, flocked to gold-backed ETFs in the Q1 2025, with inflows propelling bullion’s 19% rally in the three month period, according to the World Gold Council. Despite persistently notching fresh peaks, markets remains resolute that they are a distance away from overextended or bubble territory, and forecasts for gold to catapult even higher and hit USD3,850/oz by year-end and breach north of the USD4,000/oz threshold by Q2 2026. overall demand outlook remains mixed.

The structural bull gold narrative that we have held since January 2024 is anchored on two dimensions. First, is its dominance as a “fear” play, with gold offering clear value against hedging geopolitical risks (risks of financial sanctions, especially post Ukraine war) and hedging financial risks (concerns around Fed subordination and US debt sustainability). Second, is its standing as a “wealth” play, premised on a structural pivot in reserve management behaviour by central banks (especially in emerging markets) that have increased bullion purchases by ~5x post Ukraine war, as well as our US rates strategists view of two 25bp Fed cuts in 2025 that will underpin further ETF inflows.

Amongst the “fear” and “wealth” drivers of gold’s structural strength, central banks purchasers are central to our thesis, especially by emerging markets. To put this into context, emerging market central banks remain significantly underweight gold compared to their developed markets counterparts and are gradually increasing allocations as part of a broader diversification strategy. For instance, China – as the larger single purchaser – holds ~9% of its reserves in gold, compared to ~70% for the US, Germany, France and Italy. The global average is ~20%, which could be perceived as a pragmatic medium-term target for large emerging markets central banks, based on historical precedent and current positioning. Indeed, Russia increased its gold share from 8% to 20% between 2014 and 2020, and repatriated its gold holdings ahead of sanctions impositions.

On net, markets remain long gold recommendation but recognise that two potential (albeit uncertain) events may offer more attractive entry points – a Russia-Ukraine peace deal triggering speculative selling and/or a hawkish Fed adjustment leading to rate hikes that would present a mounting headwind to gold given its infinite duration.

Gold 4H

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