Gold this week reached new record highs, surpassing US$2,990, as Donald Trump’s policy announcements continued to rock markets.
This milestone quickly blew previous market expectations out of the water. Namely, just last month, investment analyst Justin Lin said, while consensus places the yellow metal at around US$2,700 by the year’s end, current momentum lends itself to gold surging even higher.
A decisive break of around US$2,800 would fortify the bullish trend, he said, setting gold up to exceed US$3,000 as soon as the third quarter of this year.
Shaokai Fan, head of Asia-Pacific (ex China) and global head of central banks at the World Gold Council, explained that a conflation of factors is driving gold higher, towards the US$3,000 mark.
“A weaker dollar amid a weakening economic outlook and more dovish expectations from the Fed, as well as geopolitical risks have driven gold higher in February,” Fan told InvestorDaily on Friday, adding that economic policy concerns and growth uncertainty have sparked “safe-haven” demand.
Fan also pointed to concerns that Trump may impose tariffs on gold imports, noting this could further boost the precious metal’s price.
“Recently we’ve seen pre-emptive measures reflected in the futures markets (COMEX), where trading participants have been physically flying gold inventories from London to New York ahead of potential tariffs,” he said.
“Tariffs can also be inflationary and gold has typically done well in inflationary environments as gold supply is scarce – and rising inflation expectations have been a key driver of gold at the beginning of 2025.”
Also this week, Macquarie’s commodities team raised its gold forecast, projecting a Q3 2025 average peak of US$3,150 per ounce and a single-point high of US$3,500.
The financial giant also raised its real long-term price forecast to US$2,250 per ounce, from US$2,000, on the conviction that gold prices will remain higher for longer.
Macquarie attributes gold’s strength to date to increased investor and institutional demand, driven by its appeal as a less-risky asset with no credit or counterparty risk.
“President Trump’s rapid move to announce, if not always to enact, import tariffs has contributed to geopolitical uncertainty and boosted inflation expectations, helping push down front end real rates and supporting gold in the face of periodic USD strength and initially reduced expectations for Fed rate cuts,” the team, led by Marcus Garvey, said in a market note on Thursday.
“This all comes before the passage of US budget legislation has taken on much prominence, the deficit implications of which could be key for gold.”
Macquarie believes gold prices are likely to remain historically elevated, noting that the yellow metal’s value could be “turbocharged” by Trump’s expected challenge to the independence of the Federal Reserve.
Ultimately, Macquarie noted that a shift in the structurally supportive environment for gold would likely require a change in the market’s expected trajectory for the US deficit or a compelling case for sustained higher real yields.
Gold ETFs to benefit
According to Fan, Western investors – those who have long sat on the “gold sidelines” – have also been prominent buyers of gold via exchange-traded funds (ETF) over recent months.
Gold’s elevated price and uncertainties regarding US economic policy drove significant net inflows of 100 tonnes (US$9.4 billion) into gold-backed ETFs last month.
Against this backdrop, the World Gold Council believes that a strong gold price could sustain investor interest in gold ETFs.
“Although changing expectations of the Fed’s future rate paths and other factors may pose challenges for gold, investment demand, including gold ETFs, central bank buying and interest in physical gold products – should they remain robust – may provide continued support.”