Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Gold holds steady as tariff truce sparks silver rebound
Ole Hansen
Head of Commodity Strategy
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Key points:
- The massive de-escalation in tariffs announced by the US and China on Monday saw gold fall back to—but not through—support in the USD 3,200 area
- The gold-silver falls back below 100 with silver making up for lost ground as economic clouds clears
- Weakening demand for gold through futures and western-based ETFs highlighting the current strenght from Asian buyers and central banks
The massive de-escalation in tariffs announced by the US and China on Monday saw gold fall back to—but not through—support in the USD 3,200 area, a notable feat in our opinion when considering the near-perfect storm of bearish gold news that met traders Monday morning. While the truce lowered the risk of a recession, supporting a massive risk-on move across other assets—most notably the stock market—the news also helped send the USD higher against its major peers. A ceasefire between Pakistan and India, as well as intense focus on a Russia–Ukraine solution, also helped lower the geopolitical temperature, reducing the need for safe havens. In addition, Bitcoin, a disputed alternative to gold, broke back above USD 100,000, further reducing—at least for now—the focus on gold. Investment demand for bullion-backed ETFs, especially those predominantly registered in the West, has seen a relatively small 934,000-ounce reduction after a 21 April peak at 89.8 million ounces. Speculators in COMEX futures—which in its broadest sense, using CFTC’s definitions, include managed money accounts such as hedge funds and Other Reportables—have been net sellers in the futures market for the past seven weeks. This culminated in the latest reporting week to 6 May, when positions fell to 18.1 million ounces—a 42% reduction since early February. In silver, speculators maintain a relatively small net long in the COMEX silver futures, while ETF demand has struggled to gain any traction—highlighting silver’s current challenge amid its semi-dependency on industrial demand, which has been impacted by Trump’s trade war.
The relatively muted demand for gold from ETF investors and futures speculators highlights the importance of other investors, especially those in Asia—more specifically in China—where solid retail demand for CNY-denominated ETFs in recent months has received a great deal of attention. Together with central bank demand, these two groups have so far managed to keep prices supported and have prevented an even deeper correction.
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 unlikely to dissipate in the near term, we continue to view the risk as skewed toward even higher prices over time. In the very short term, gold continues to consolidate, with the technical outlook—as per the chart below—raising the risk of a deeper correction towards a key area of support in the USD 3,155 to USD 3,165 area.
Silver making up for lost ground as economic clouds clears
While the dramatic truce in the US–China trade war—at least temporarily—has hurt gold, with a stronger USD and reduced safe-haven bid taking its toll, silver has managed somewhat better. Talks and lower tariffs have reduced the risk of a full-blown US recession later this year, while also slowing an economic slide in China. With silver deriving close to 55% of its demand from industrial applications, the white metal has managed to recoup some of the ground it lost in the weeks that followed Trump’s aggressive “Liberation Day” speech.
The gold–silver ratio—which ahead of April had spent months trading within a five-dollar channel around 90 ounces of silver to one ounce of gold—briefly surged above 105 after silver fell and gold found a haven bid in response to an escalating global trade war that raised concerns over economic growth and stability. The de-escalation in tariffs for a 90-day period saw global stock markets race higher, while procyclical commodities from energy to industrial metals received a bid. This helped shield silver from following gold lower, resulting in a drop in the gold–silver ratio back below 100 to a current level around 98.50. From a technical perspective, the ratio needs to drop below 97.50 before opening up the possibility of a return to the mentioned pre-April range.
As per the somewhat messy spot silver chart below, we note support continues to emerge around USD 32, ahead of Fibonacci support at USD 31.62—the 0.382 retracement of the latest 19% rally from the post-Liberation Day correction low. To the upside, some resistance has emerged around USD 33.25, ahead of a recently established triple top at USD 33.68.
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