Recent structural changes have strengthened the case for a bearish outlook on gold, with strong resistance ahead.
Author: Xiao Yanyan, Jin Shi Data
As bulls seize on the economic uncertainty brought about by the U.S. import tariff plan, gold prices have entered uncharted territory. However, behind the push towards the record of $3,000 per ounce, some bearish signals are also being sown.
Gold started 2025 with a significant surge, breaking records eight times, and as of February 11, it had risen over 10%. Prior to this, in 2024, gold prices recorded their largest annual increase in 14 years due to strong central bank purchases, geopolitical uncertainties, and loose monetary policies.
The newly elected U.S. President Trump, disregarding the risks of a trade war, turned to tariffs to assist struggling domestic industries, further enhancing gold's appeal as a safe haven.
This week, when Trump raised tariffs on steel and aluminum, spot gold hit a record of $2,942.70 per ounce.
Philip Newman, managing director of consulting firm Metals Focus, said, “What we are seeing is a shift in the motivation for safe-haven buying—from being driven by uncertainties in the Middle East to threats and implementations of tariffs.”
The rise last year began before the Federal Reserve started cutting interest rates, and its increase was unexpected, as investors clearly seemed willing to ignore the opportunity cost of holding zero-yielding gold. Gold also often disregards other typically adverse factors, such as a strengthening dollar.
Independent analyst Ross Norman stated, “It is shocking that gold rebounded with easing inflation; all our understanding of gold price behavior seems to be challenged.”
Due to concerns that the U.S. tariff plan might affect the domestic supply of gold, bullish sentiment among gold investors has grown.
As a result, the premium of the most active U.S. gold futures relative to London spot prices has experienced significant volatility. This premium, which has historically been only a few dollars, expanded to $40 per ounce before Trump's inauguration on January 20, and exceeded $60 during the inauguration week.
Market participants attempted to profit from lucrative arbitrage opportunities or to cover their existing positions on Comex, with the premium attracting a large amount of gold delivery to Comex inventories. Since late November last year, Comex's gold inventory has surged by 18.6 million ounces, valued at $54 billion.
As participants in the world's largest over-the-counter gold trading center—London—rushed to borrow gold from the Bank of England's vaults, the waiting time to obtain gold from the Bank of England has dramatically increased. The supply of gold from Switzerland and Asia has surged, and gold leasing rates in London and India have also skyrocketed.
However, by this Tuesday, the Comex premium had narrowed to $28 per ounce, even as gold continued to flow into Comex inventories, with traders and analysts expecting this activity to gradually diminish.
John Reade, senior market strategist at the World Gold Council, said, “After a surge in gold imports in New York, the dislocation between New York futures prices and the London over-the-counter market seems likely to be nearing its end. The queue for withdrawing gold from the Bank of England's vault should decrease in the coming weeks, alleviating the apparent liquidity shortage in the London market.”
Nicky Shiels, head of metals strategy at MKS PAMP SA, stated that while prices may break through $3,200, the issues of physical gold dislocation caused by tariffs and potential structural changes (including a decline in risk appetite, reduced participation, and a reversal of liquidity issues) are making gold prices increasingly bearish.
She mentioned that her company’s average price forecast for 2025 will remain at $2,750, with no intention to raise the forecast, adding, “If there is anything different in the past few months, it is that recent structural developments have reinforced the case for a bearish outlook on gold.”
Jewelry demand has been suppressed due to high gold prices, with major markets like India seeing discounts, further indicating that once the tariff situation clarifies, the upward momentum may slow down.
Richemont, the manufacturer of Cartier, stated last November that it had to be “extremely cautious” in passing on soaring gold prices in the pricing of watches and jewelry.
According to Bank of America Securities, if local currencies weaken due to U.S. tariffs, emerging market central banks may reduce their gold purchases.
Gold exchange-traded funds (ETFs) backed by physical gold have also remained relatively calm, with inflows into funds listed in Europe in January, but outflows in North America.
From a technical perspective, gold has been in the overbought zone of the relative strength index since early February.
Gold may encounter strong resistance near the important milestone of $3,000— last year, gold wobbled above the $2,000 mark multiple times before decisively breaking through.
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