Gold at the $3000 mark: 3 factors for and 3 against the gold rally

Diego Franzin, Head of Portfolio Strategies Plenisfer Investments SGR

Gold neared $3.000 per ounce on February 20 (spot price: $2.954 per ounce*[1]), and today the market is increasingly open to the possibility of surpassing this record threshold.

Some analysts even speculate that gold could surge toward $3,500 per ounce if investment demand rises by 10% this year (Source: BofA). The first signs of this trend already emerged in January, with European investors returning to the gold market after nearly three years of disinterest.

Gold has been on a steady upward trajectory despite rising U.S. bond yields and a strengthening U.S. dollar—two factors that would typically weigh on the precious metal. This suggests that gold’s fundamental market conditions have undergone a structural shift due to several factors that, in our view, are likely to persist.

In 2024, gold prices are no longer being penalized by financial investors’ sell-offs: global ETF flows remained essentially unchanged, with a slightly negative balance of -7 tons compared to -244 tons in 2023*. More notably, in January, European ETF flows turned positive after nearly three years. More broadly, investment flows—including not just ETFs but also Bars, Coins, and Medals—grew by 24% in 2024*.

Gold has thus become increasingly relevant in investor portfolios, and we do not expect this trend to reverse in the current year—quite the opposite. In today’s climate of heightened uncertainty, we believe gold is set to play an even greater role in protecting investments and stabilizing portfolios.

As the ultimate safe-haven asset, gold will continue to be supported by uncertainty surrounding geopolitical developments, trade tensions, and fiscal imbalances—particularly in the United States—as well as by central bank demand. According to the World Gold Council, gold demand in 2024 reached 4,974 tons (+1% vs. 2023), with central banks maintaining their position as net buyers for the third consecutive year, purchasing over 1,000 tons. As long as central banks remain this active, they will provide a strong pillar of support for gold prices.

At the beginning of the year, another technical factor emerged in gold’s favor: the U.S. threat to impose tariffs on all goods from Canada and Mexico has raised concerns that gold and silver imports might also be affected, making physical settlement of futures contracts more costly. Consequently, the cost of borrowing gold (and silver) has risen*, as has the cost of shorting major U.S.-listed precious metal ETFs (GLD.US and SLV.US)*[2]. Additionally, speculation around potential U.S. Treasury issuances backed by gold has further supported gold prices.

In this scenario, we see three potential supporting factors for gold and three possible risks.

Potential supporting factors:

1. India: The country has decided to reduce import duties on gold and silver, reversing a policy in place since 2012. This could pave the way for increased purchases from India, the world’s second-largest gold consumer.

2. China: The country has launched a pilot program allowing insurance funds to invest in gold, which could generate demand for approximately 300 tons—equivalent to 6.5% of the annual physical market. Additionally, gold ETF assets under management in China have surged from about 50 tons in 2022 to 120 tons at the end of 2024. The People’s Bank of China also purchased 10 tons of gold in December 2024, following a 5-ton purchase in November*. Rising U.S.-China tensions could further encourage these purchases.

3. U.S.: Threats and actions. If the U.S. follows through on its threatened tariffs on gold and silver, it would further amplify the current short squeeze. Additionally, any new financial sanctions threats by the U.S. could push countries to seek alternatives to the U.S. dollar, with gold often being the first choice.

Potential risks to gold’s rally:

1. U.S. Treasuries: After four consecutive years of losses, many investors have shifted from Treasuries to gold. A significant U.S. spending cut, leading to tighter debt issuance, could reduce the supply of Treasuries, supporting their value and drawing investors back to this asset class at the expense of gold.

2. China: If China’s stock market experiences a structural recovery, local capital may shift away from gold and back into domestic equities.

3. Russia: A peace agreement between Russia and Ukraine that includes the return of confiscated Russian assets could slow gold’s momentum, as the recent gold rally coincided with these asset seizures.

Will gold continue its rally?

It’s worth noting that current gold prices are near historic highs relative to several valuation metrics, including gold-to-oil, gold-to-wages, and gold-to-real-estate ratios in the U.S. Whether gold embarks on another rally to new record levels will depend on the factors outlined above. However, at Plenisfer, we will continue to view gold as a key asset for portfolio stabilization and protection against potential new waves of inflation.

[1]*Source: Bloomberg

[2] *Source: Bloomberg

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