Gold breaks through $3000, analysis of the reasons for the sharp rise in gold prices

Risk aversion sentiment heats up, gold breaks through $3000 mark and consolidates

On March 14th, COMEX gold futures prices broke through the $3000/ounce mark in the morning, setting a new historical high at $3001.1/ounce, an increase of 0.33%. At the same time, the spot gold price in London also broke records, at $2990.2 per ounce.

The prices of precious metals have surged significantly, mainly due to concerns about Trump's tariff policies and an increase in market risk aversion. Next, we need to pay attention to events such as the expiration of the US government's temporary funding bill and the US trade tariff policy.
Since the beginning of this year, international gold prices have continued to rise, with COMEX gold futures rising by over 12% this year. Zhang Chen, a precious metal analyst at Yide Futures, believes that the volatile rise in gold prices both domestically and internationally at the beginning of the year was mainly influenced by the uncertainty of US trade policies. Recently, the policy uncertainty mentioned above has continued to deepen, coupled with the marginal weakening of some US economic data, leading to a downward trend in the economic outlook and exacerbating financial market turbulence, which has also supported the strong performance of gold prices.
On a macro level, data released by the US Department of Labor on the 12th showed that the US Consumer Price Index (CPI) rose by 0.2% month on month and 2.8% year-on-year in February this year. After excluding volatile food and energy prices, the core CPI in February rose by 0.2% month on month and 3.1% year-on-year, far exceeding the long-term target of 2% set by the Federal Reserve.
According to the analysis of Xinhu Futures, in the short term, the US stagflation crisis has been temporarily postponed but recession concerns have not subsided. The uncertainty of Trump's policies may make high volatility the norm, coupled with gold prices approaching the $3000 mark again, volatility may increase. In addition, the wave of dollarization is expected to continue, and the growth trend of US bond size is difficult to change. The global de dollarization process may accelerate.
In terms of long-term fund holdings, SPDR Gold ETF holdings increased by 7.17 tons per day to 905.81 tons.

The US Commodity Trading Commission (CFTC) has announced that as of the week ending March 4, 2025, long positions on COMEX gold futures on the New York Mercantile Exchange decreased by 23708 or 5.12% to 439688; Non commercial net long positions decreased by 18364 to 243261, accounting for 49.8%. The total position is 489270, a decrease of 22909 or 4.47% compared to the previous period, with a total of 294 traders.
In the long run, institutions generally continue to be bullish on gold prices. Goldman Sachs recently raised its year-end target price for gold, expecting the price to reach $3100 per ounce by the end of 2025, further up from the previous target price of $2890.

Macquarie Group believes that the expectation of "secondary inflation" in the United States is heating up, and it is expected that the price of gold in the third quarter of 2025 may reach $3150 per ounce, with the highest price expected to touch $3500.

This is a continuation of the rise in gold prices over the past year. In 2024, domestic gold prices will rise by over 27%.

Li Wei, Multi asset Investment Director of the Asset Management Department of France Pakistan Securities (China) Co., Ltd., said to Caijing that the current factors supporting the rise of gold were the disturbance of the global market caused by the uncertainty of tariff policy after Trump was elected President of the United States, the US debt crisis, the increase of gold holdings by the global central bank, and the reduction of interest rates by the Federal Reserve.

Joni Teves, precious metals strategist at UBS Global Investment Bank, stated in the latest report that international gold prices may break through $3200 per ounce in the next few years, then gradually decline and stabilize at high levels. The driving factor behind the rise in gold prices is still demand. In a highly uncertain and volatile macro environment, gold is seen as a safe haven asset, investor sentiment is high, and government demand for gold is stronger than expected, all of which provide support for gold prices, "she said.

Economic uncertainty boosts gold prices
Levi stated that after Trump was elected as the President of the United States, his trade and foreign policies brought many uncertainties to the market, which greatly affected investors' investment sentiment. Moreover, the US government is also facing the risks of debt crisis and shutdown. In this context, institutional and retail investors have been buying gold bars, coins, and exchange traded funds (ETFs), while global central banks have increased their holdings of gold. Strong demand has supported the rise in gold prices, ultimately breaking through the $3000/ounce mark.

According to Xinhua News Agency, on March 13th, Trump stated on the social media platform "Real Social" that if the EU does not lift the 50% tariff on American whiskey products, the US will soon impose a 200% tariff on all wine, champagne, and other alcoholic products from France and other EU countries.

Since February, Trump has imposed tariffs on multiple countries and faced countermeasures from them.

Against this backdrop, market concerns about the trade war and economic outlook have gradually intensified, triggering a wave of selling in the US stock market. On March 13th local time, major US stock indices continued their downward trend, with the S&P 500 index falling into a technical correction. As of now, the S&P 500 index has fallen 10% from its record high in February, and its market value has evaporated by $5 trillion.

The market reflects concerns about the prospects of the US economy. The latest data from the US Department of Labor shows that in February, the non farm sector added 151000 new jobs and the unemployment rate was 4.1%, both of which were lower than market expectations. In the eyes of market participants, this indicates that some companies have suspended recruitment due to unclear tariff policies and economic prospects.

According to data from the World Business Council, in February, the US Consumer Confidence Index was 98.3, significantly lower than January's 105.3. This is the largest monthly decline in the US Consumer Confidence Index since August 2021, and the index has been declining for three consecutive months.

Li Wei stated that institutional investors often use ETFs and financial derivatives to invest in markets such as stocks, bonds, and gold. At present, the market's risk aversion is high, which has driven funds to shift from the equity market to the gold market.

According to data from the World Gold Council, as of the end of 2024, the total holdings of global gold ETFs reached 3219 tons. The total asset management scale of gold ETFs reached 274 billion US dollars, setting a new historical record. From a regional perspective, Asia has the highest inflow of gold ETFs, while North America has achieved positive inflows for the first time since 2020. The outflow of gold ETFs in Europe has also significantly decreased compared to 2023.

According to Bloomberg statistics, as of the end of February, the holdings of global gold ETFs increased by approximately 81 tons in 2025, reaching the highest level since January 2024.

International investment banks raise gold price trend

Behind the influx of investors into the gold market, international investment banks have raised the trend of gold prices. Goldman Sachs believes that if economic policy uncertainty, including tariffs, persists, an increase in speculative positions could push gold prices to reach $3300 per ounce. In addition, the Federal Reserve's two interest rate cuts will gradually boost the holdings of gold ETFs.

Tevez said that the high point of gold prices may exceed $3200 per ounce, and then gradually fall back, stabilizing at a high level in the next few years.

Li Wei said that in the context of addressing inflation and de dollarization, global central banks will still be an important driving force in the gold market, which will become an important support for gold prices.

Goldman Sachs predicts that based on the global trend of central bank gold purchases, global central bank gold demand will rise to 50 tons per month in the future, up from the previous estimate of 41 tons per month. UBS also stated that against the backdrop of asset diversification and de dollarization trends, global central bank demand for gold will remain strong in the coming years.

Li Wei further stated that the current inflation in the United States has not completely subsided, which will drive expectations of interest rate cuts by the Federal Reserve, thereby driving down US bond rates and driving up gold prices. Generally speaking, gold is considered a non yielding asset, and a decline in US Treasury yields means a decrease in the opportunity cost of holding gold.

At present, the market is waiting for the latest monetary policy meeting of the Federal Reserve, and many market participants expect the Fed to maintain the benchmark interest rate range unchanged at 4.25% -4.50%.

Li Wei stated that under the influence of uncertain factors such as tariffs and expectations of Fed interest rate cuts, investing in gold will yield substantial returns, which will increase investors' enthusiasm for gold and further enhance the attractiveness of gold ETFs.