Gold surge hides undercurrents as bearish factors intensify
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Gold surge hides undercurrents as bearish factors intensify
Recent structural changes have strengthened the case for bearish gold, with strong resistance just ahead.
Navigating Web3 tides with focused insightsAuthor: Xiao Yanyan, Jinshi Data
As bulls seize on economic uncertainty from U.S. import tariff plans, gold prices have entered uncharted territory, yet behind the push toward a record $3,000 per ounce, some bearish signals are emerging.
Gold started 2025 with strong gains, breaking records eight times and rising over 10% by February 11. In 2024, fueled by robust central bank buying, geopolitical uncertainty, and accommodative monetary policy, gold posted its largest annual gain in 14 years.
Newly elected U.S. President Trump, disregarding risks of triggering a trade war, has turned to tariffs to aid struggling domestic industries, further boosting gold’s appeal as a safe-haven asset.
Spot gold hit a record of $2,942.70 per ounce this week as Trump raised steel and aluminum tariffs.
"What we're seeing is a shift in safe-haven buying motivation," said Philip Newman, managing director at consultancy Metals Focus, "moving from being driven by uncertainty in the Middle East to threats and implementation of tariffs."
Last year's rally began before the Federal Reserve started cutting rates, and its pace was unexpected—investors clearly willing to ignore the opportunity cost of holding zero-yield gold. Gold has also frequently defied other usual headwinds such as a stronger dollar.
"It's striking that gold has rebounded even as inflation eases," said independent analyst Ross Norman. "Everything we thought we understood about gold price behavior seems to be challenged."
Bullish sentiment intensified amid concerns that U.S. tariff plans could disrupt American gold supplies.
As a result, the premium for the most active U.S. gold futures over London spot prices swung dramatically. Historically just a few dollars, it widened to $40 per ounce ahead of Trump’s January 20 inauguration and exceeded $60 during the inaugural week.
Market participants sought to profit from arbitrage opportunities or cover existing positions on Comex, driving large volumes of physical gold into Comex inventories. Since late November last year, Comex gold inventories surged by 18.6 million ounces, worth $54 billion.
With participants in London—the world’s largest over-the-counter gold market—racing to borrow gold from the Bank of England vaults, wait times for accessing BOE gold have sharply increased. Shipments of gold to the U.S. from Switzerland and Asia-centered hubs surged, while gold lease rates in London and India spiked.
But by Tuesday this week, the Comex premium had narrowed to $28 per ounce. Even though gold en route continues to flow into Comex stocks, traders and analysts expect this activity to gradually subside.
"After the surge in gold imports into New York, the dislocation between New York futures prices and the London OTC market appears likely to near an end," said John Reade, senior market strategist at the World Gold Council. "Queuing to withdraw gold from BOE vaults should ease in the coming weeks, alleviating the apparent liquidity shortage in the London market."
Nicky Shiels, head of metals strategy at MKS PAMP SA, said while prices may breach $3,200, the resolution of physical gold dislocations caused by tariffs—and the reversal of potential structural shifts including lower risk aversion, reduced participation, and diminished liquidity—is making gold increasingly bearish.
She said her firm’s average price forecast for 2025 will remain at $2,750, with no intention to raise it. "If anything has changed over recent months, it's that recent structural developments have strengthened the case for being bearish on gold."
Jewelry demand has been suppressed by high gold prices, with discounts appearing in major markets like India—further suggesting the rally may slow once the tariff outlook clarifies.
Richemont, maker of Cartier, said in November it had to be "extremely cautious" about passing on surging gold costs in pricing watches and jewelry.
According to BofA Securities, emerging market central banks may reduce gold purchases if their local currencies weaken due to U.S. tariff hikes.
Gold exchange-traded funds (ETFs) backed by physical gold have also remained relatively quiet, with inflows in Europe-listed funds in January but outflows in North America.
From a technical standpoint, gold has been in overbought territory on the relative strength index since early February.
Gold may face strong resistance near key milestones like $3,000—last year, gold wavered multiple times above the $2,000 level before decisively breaking through.
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