gold price breaks through $3000 per ounce Cause analysis and market forecast

Recently, driven by strong demand from global investors, gold prices have broken through the historic mark of $3000 per ounce. Behind this phenomenon is the dual impact of uncertainty in US policies and the sustained large-scale purchases of gold by central banks around the world. According to Greg Firth, head of North American sales and trading at StoneX, global gold is undergoing a massive "shift", with a large amount of gold being rapidly transported to the United States since the fourth quarter of last year. The United States imported $30 billion worth of gold in January, which is about twice the amount during the pandemic.

Many traders who short gold futures in the Comex market are trying to build as much physical inventory as possible in New York to cope with possible tariff policy changes. Although gold, as a monetary asset of the United States, is usually not subject to tariffs, anything is possible under the Trump administration. From a risk management perspective, hoarding gold in New York is reasonable, which has also caused a temporary shortage of physical gold in the London market, accelerating the rise in gold prices. Goldman Sachs believes that gold prices may exceed the benchmark forecast of $3100 by the end of 2025, and may even break through $3100 to $3300; StoneX believes that the price of gold may rise to $3300 to $3500, and silver and copper may also be severely undervalued.

Policy uncertainty drives up gold prices

On March 13th, spot gold once again reached a historic high of $2989, while the Comex gold futures price on the New York Mercantile Exchange had already touched $3000. On March 14th, spot gold also broke through the $3000 mark and briefly touched $3005.08. Goldman Sachs stated in its latest report that its central bank and other institutions (excluding the United States) 'real-time forecast of gold demand in the London OTC market shows strong demand in January, reaching 117 tons, far exceeding the previous forecast of 50 tons per month. According to data from the World Gold Council, global gold demand reached a historic high of 4974 tons in 2024. Among them, global central bank gold purchases have exceeded 1000 tons for three consecutive years, with a year-on-year increase of 54% in the fourth quarter, contributing more than 70% of the increase in gold demand in 2024.

Amid the immense uncertainty surrounding Trump 2.0, global central banks, especially those in emerging markets, are expected to maintain high demand for gold. As gold prices continue to hit new highs, in addition to central banks and large traders, individual investors have also accelerated their investment in gold assets. The holdings of global gold ETFs experienced a major surge in February, increasing by approximately 3 million ounces. Among them, the world's largest gold ETF (GLD) recorded its largest single week net inflow in late February, with approximately $4 billion.

Physical gold accelerates its flow to the United States

It is worth noting that while gold prices have surged, Comex gold inventories have exceeded 40 million ounces (approximately 1250 tons), an increase of over 23 million ounces since the November US election, reflecting unprecedented demand for physical gold delivery. Meanwhile, the inventory of London gold has been declining for three consecutive months. Not only London, but also gold from all over the world is accelerating its shipment to the United States. Comex gold inventory data shows that the United States imported $30 billion worth of gold in January, which is about twice the amount during the pandemic. Among them, Switzerland's gold exports to the United States in January reached a 13 year high of 192.9 tons.

Due to the different delivery specifications of gold bars between New York and London, London gold needs to be transported to a Swiss refinery for re casting before being shipped to New York. The record breaking gold trade between the two countries caused the US trade deficit with Switzerland to skyrocket to about $22 billion in January, approaching that of China. StoneX stated that typically people want to transport gold from London to Comex gold futures delivery warehouses in New York as a reserve for short order delivery, but typically only about 10% of futures short positions end up being delivered in physical gold. However, since the end of last year, this situation has been changing. Starting from December last year and January this year, banks and traders believe that if the United States announces tariffs on gold, silver, platinum, palladium, and other metals, there may be a shortage of gold in the New York market. Therefore, over 2000 tons of gold have crossed the Atlantic, and it is expected to see more of this in the coming year.

Greg Firth analyzed that gold is usually not subject to tariffs, but under the Trump administration, anything is possible. From a risk management perspective, hoarding gold in New York is reasonable, which has also caused temporary physical gold shortages in the London market. This phenomenon has led to changes in the structure of the gold market. Traditionally, the gold forward curve in the London market is in a "contango" position, where the forward price is higher than the spot price. However, in recent times, due to physical shortages, the market structure has shifted towards a 'backward market', where spot prices are higher than forward prices. In addition, the EFP (Exchange for Physical) price difference between the London and New York markets rapidly surged from $10 per ounce to $50 to $60 per ounce between November and December last year, reflecting the strong demand for physical gold in New York. Some traders have realized that if they can extract physical gold from London and ship it to New York before the tariffs are implemented, they will receive lucrative returns when the market is in reverse, such as earning spreads by renting out gold inventory. In this market environment, many traders who previously held short positions have had to replenish their positions, further pushing up gold spot prices and Comex futures prices, creating a situation similar to a "forced short market". Due to tight market liquidity, some traders are unable to bear the cost of holding short positions and are forced to close them. Fu Xiao, the head of commodities at Bank of China International, told reporters that from January to February, there was a risk-free arbitrage between London physical gold and Comex gold futures, which attracted a lot of physical gold to the United States. At present, with the narrowing of arbitrage space (from $60/ounce in January to $10/ounce), this situation has significantly eased. Another significant signal is the significant decrease in gold lease rates, indicating that physical gold is not as scarce. Comex's physical gold inventory has reached a four-year high (39.5 million ounces), and with future market fluctuations, it is not ruled out that these gold may flow back to London (with the lowest gold storage costs) or other places. However, for now, the market's risk aversion still seems to dominate.

Gold is expected to reach $3200 per ounce in the future

Wall Street generally predicts that a gold price of $3000 per ounce may just be the beginning. The uncertainty of US policies may further drive investor demand, while Goldman Sachs predicts that central banks' demand for gold purchases will remain at a higher level than before Russia's central bank reserves were frozen in 2022. Even if a ceasefire agreement is reached in the Russia-Ukraine conflict in the future, this trend will not change, because the precedent of freezing foreign exchange reserves has had a significant impact on global central banks. The uncertainty of policies and geopolitics has driven up the price of gold in this round. If the US economy slows down and expectations of interest rate cuts return to normal, this will further support non interest bearing asset gold. The yield of the 10-year treasury bond bond of the United States has plummeted to around 4%, with an earlier peak approaching 5%. Higher tariffs could seriously impact US GDP, and Goldman Sachs has lowered its forecast for year-on-year GDP growth in the fourth quarter of 2025 to 1.7%, previously at 2.2%, and slightly raised the probability of a recession within 12 months from 15% to 20%. Currently, the expectation of the Federal Reserve cutting interest rates within the year has risen from one to three. UBS told reporters that in the risk scenario of a comprehensive increase in tariffs, it is expected that the price of gold will reach $3100-3200 per ounce, while technical (overbought) unfavorable factors may lead to gold falling to $2790.