Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Gold rises as Chinese demand rebounds post-holiday
Ole Hansen
Head of Commodity Strategy
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Key points:
- Gold trades sharply higher after last week's correction attempt failed to get any traction
- One key dynamic we continue to watch is Chinese investors which have returned as buyers following an extended labour day holiday.
- While leveraged traders have reduced their net long to a 14-month low, demand for bullion-backed ETFs in China remains strong
- Silver lags amid cyclical pressures while platinum struggles for momentum in a tightening range
Gold continues to recover from the latest correction attempt, which coincided with an extended Labour Day holiday in China. As we highlighted in last week’s update, Chinese investor and central bank demand remain the two key drivers behind gold’s year-long rally, which has so far seen the yellow metal surge by close to 28% this year. China has emerged as a dominant source of demand, particularly through local gold-backed ETFs, which have already surpassed their 2024 inflow totals. A pre-holiday surge in premiums over international spot prices highlights persistent domestic appetite—largely retail-driven—amid domestic economic concerns and doubts over the long-term stability of the US–China relationship. Having seen the latest correction run out of steam around USD 3,200— ahead of key support in the USD 3,160–3,170 area—gold today reached USD 3,387 during the Asian session. This reestablished a week-long trend in which the COMEX gold future has recorded its biggest gains in the “non-pit” hours, while it has struggled during the US “pit” trading hours (08:20 to 13:30 EST). This development underpins a recent trend in which speculators, such as hedge funds and CTAs, have been net sellers for six straight weeks—culminating in the latest reporting week to 29 May, when the net futures long held by this group fell to a 14-month low of just 11.6 million ounces. This represents a 55% reduction from last September, when gold traded around USD 2,650. So, while leveraged funds have exited gold—partly due to a lower risk appetite following a bruising couple of months across markets—other investors have picked up the baton, most notably in Asia. Looking at total known holdings among gold-backed exchange-traded funds (mostly registered in the West), recent weeks have seen a 1 million ounce decline after rising close to 7 million earlier this year. Meanwhile, as mentioned, China’s gold-backed ETFs have already seen flows surpass their 2024 inflow totals. Having already reached our 2025 price target of USD 3,500, we are currently in wait-and-see mode. However, with several key structural drivers—outlined below—unlikely to dissipate in the near term, we continue to view the risk as skewed toward even higher prices over time.
Silver lags amid cyclical pressures
Silver, meanwhile, has struggled to keep up with gold’s renewed rally, leaving the XAUXAG ratio anchored above 100. While gold enjoys strong demand from central banks and Asian investors, silver has been hurt by its semi-industrial exposure—making it a pro-cyclical commodity and therefore less suitable as a portfolio hedge against the economic headwinds currently supporting gold demand. One such headwind has been a slowdown in Chinese solar production, as the sector undergoes a period of oversupply.
However, given the historical correlation between gold and silver—and our non-scientific observation that silver tends to behave like gold, but on steroids—silver will need an improved technical outlook in order to reclaim some of the ground recently lost to gold. As per the somewhat messy chart below, we note that silver’s latest correction below USD 32 was halted ahead of Fibonacci support at USD 31.63, the 0.382 retracement of the latest 19% rally from the post-Liberation Day correction low. To the upside, we note some trendline resistance at USD 33.35, ahead of a recently established triple top at USD 33.68. Platinum struggles for momentum in a tightening range
Finally, a quick word about platinum—a metal that, over the last decade, has seen its value relative to gold decline from a 1-to-1 ratio to the current 3.5-to-1, not far from the record 3.6-to-1 ratio reached last month. As per the chart below, which spans some 17 years, the metal has been trading mostly sideways for the past decade, averaging USD 955 per ounce—just below the current price—while gold currently trades around 50% above its long-term average.
Eventually, the narrowing trading range will yield a breakout, and only then are we likely to see some renewed interest from technically focused traders looking for fresh momentum. In the meantime, managed money accounts in the COMEX futures market—unsurprisingly, given the lack of direction—continue to trade platinum with a relatively neutral bias. For that to change, we are focused on resistance at USD 1,010 and ultimately on the shown downtrend from 2008, which this month is located around USD 1,025.
Key drivers behind gold’s year-long and ongoing rally—some of which may eventually also support the semi-precious investment metals, most notably silver and platinum.
US Fed Funds rate expectations: Market participants closely watch interest rate expectations set by the Federal Reserve, as they heavily influence the attractiveness of gold. Currently, the futures market is pricing in the possibility of a 75–100 basis point rate cut before year-end, suggesting a more accommodative monetary policy. Lower interest rates reduce the opportunity cost of holding gold (which doesn’t pay interest), thereby supporting its price.
Investment demand for “paper” gold through futures and exchange-traded funds (ETFs): The demand for gold-backed financial products depends on technical market factors, such as price momentum, as well as macroeconomic indicators. In addition, a key factor for investors in ETFs is the cost of holding a non-yielding assets like gold, with the prospect for lower funding cost and recession worries boosting demand.
Rising US inflation expectations: Investors often turn to gold as a hedge against inflation. Recently, falling real yields (nominal yields minus inflation expectations) across the US Treasury yield curve have signaled growing concerns about future inflation. As inflation expectations rise, the real return on fixed-income assets decreases, increasing the relative appeal of gold.
Geopolitical risks: Global instability tends to push investors toward safe-haven assets like gold. A recent correlation between defense stocks and gold suggests that as geopolitical tensions rise—such as conflicts, wars, or diplomatic strains—investors seek safety in gold, thereby supporting its price. In addition, the current trade war adds downside risks to growth while lifting the geopolitical temperature, especially between the US and China, the world's two biggest economies.
Central bank demand amid continued focus on reducing dependency on the USD: A growing number of central banks are diversifying their reserves away from the US dollar, often turning to gold as a neutral reserve asset. Notably, China, India, Turkey, and Russia have been leading this trend. In the last three years to 2024, central banks bought more than 1,000 tons in each year, a process that looks set to continue in 2025 and beyond, thereby underpinning the market as supply is being removed from the market.
Strong Asian demand, particularly from Chinese investors, driven by concerns over domestic economic instability, weak real estate and stock markets, and as a hedge against potential Renminbi devaluation amid tariff-related export pressures.
Recent commodity articles:
5 May 2025: COT Report: Dollar-selling persists; Crude length trimmed ahead of OPEC output hike
1 May 2025: Gold corrects sharply from record highs as Chinese demand pauses
29 April 2025: Copper navigates energy transition supply shocks and market turmoil
28 April 2025: COT Report: Continued gold selling; USD weakness drives record JPY long
25 April 2025: Commodities weekly Energy slump overshadows strength in gold and agriculture
23 April 2025: Blowout top leaves Gold in consolidation mode
22 April 2025: Commodities return Why allocation matters
16 April 2025: Whats next as gold hits our USD 3300 target
15 April 2025: COT Reports show hedge funds racing to cash post-Liberation Day
11 April 2025: Commodities weekly As chaos reigns whats next for markets
10 April 2025: YouTube Interview: Gold, silver, copper, oil - prices, supply, demand in 2025
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
7 April 2025: COT on Forex and Commodities - April 7 2025
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
Podcasts that include commodities focus:
6 May 2025: Bears hang in at key levels as Palantir rides the retail whirlwind
23 April 2025: Trump going soft on tariffs versus the direction of travel.
11 April 2025: US and China are slipping into an economic war
4 April 2025: Markets melts down as recession risks go global
1 April 2025: Bracing for Liberation Day
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
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