By Chris Weston, Head of Research at Pepperstone
It feels like only a matter of time before the trading floors are deafened by the sound of alerts pinging off as spot gold and gold futures hit the illustrious $5,000 level. That target is now clearly in sight and is acting like a magnet, pulling in the buyers, while those sitting on profitable positions and looking to bank some profits feel compelled to do so at the big figure, and to squeeze another lazy $50 out of the move.
We all know the bull trend in gold is mature and, at some point, due for a pause or even a pronounced retracement. Yet the buying across all forms of gold exposure has been relentless. While many have recently framed gold as a hedge against fallout from Trump’s pursuit of Greenland and the risk of a US–Europe tariffs war – yet, the subsequent emergence of a deal framework and the removal of Trump’s tariff threats should, in theory, have seen those gold hedges unwound – instead, gold pushed to new highs. Perhaps the market has seen enough, and that gold increasingly looks like a hedge against Trump as the US President and the absolute unpredictability that comes with it.
If US assets are to command a political risk premium, it is not being expressed in the US equity or credit markets, but through the USD reserve channels. While rising US debt levels may be seen as reason investors own gold, it appears that global central banks, particularly in the emerging market space, are finding almost daily reasons to rotate reserves out of USD and into gold. There is comfort in holding an asset perceived as secure in a world where the global order may be shifting, tariffs may no longer be sufficient, and the risk of more drastic policy actions remains firmly on the table.