President Trump continues to wear the tag of the most influential inhabitant there has ever been in the White House. Doling out his wisdoms and unique take on diplomatic negotiation, markets were forced to ignore such lofty data last week in the form of European GDP, US CPI, PPI and Retail Sales and Jerome Powell’s two-day testimony on Capitol Hill. Crude builds and refinery maintenance in the United States, Gas price strength, the bite of sanctions on Russian supply in energy markets ran short shrift in consideration and even though WTI had a range of over $3/barrel, Heating Oil over 12c/gallon and RBOB 10c/gallon, prices eventually recorded headway of nigh on a big fat zero. Oil market participants are not showing signs of immunity, it is just confoundedness. Oil price movements under Tump I were often described as ‘unprecedented’, it appears as if under Tump II our market will be once again subject to the President’s precedents.

Politics looks set to dominate markets yet again this week and many words will be allocated to how Europe is fighting for a seat at the Ukraine peace-deal sit down between Presidents Trump and Putin, which for the moment also extraordinarily does not include President Zelensky. Process, or their anticipated and speculated outcomes, will be reflected in all investment suites. Tariff talk, a moveable feast, is never far away but at present is starting to serve oil participation ill. Options pricing in WTI is now starting to take a bearish lean and using Bloomberg calculations, non-commercial WTI positions fell by 17% last week showing evacuation of the oil-space. Our market, when faced with pointed geopolitical confrontation normally sorts itself out into a bullish or bearish attitude very quickly. In present climes, there are no sharp daggers of influence, just abrasive cuts to confidence and oil prices and those that conduct business related to them, hate it.

Would you own the black stuff or the yellow?

The sheen of Gold, so much a glittering star in 2024, transfers its performance seamlessly into 2025. The precious metal, such a source of haven in times of strife is never more in demand, and what a world of strife we currently live in. Gold is on an absolute tear and with $3,000 an ounce well within sight, that number might just prove to be a psychological mark in the sand rather than a place considered unbreakable. 

To give an idea of its stellar performance on January 2nd, 2024, the price was $2074, exactly one year later it priced at $2644/troy ounce even after the usual spate of profit taking during the back part of 2024 and folio management which Gold endures at the end of each year. Track back to the first trading day of 2023 and one will find the price to be $1843. Therefore, the rally is no Johnny-come-lately, the current US government might be fanning the flames, but the fire of Gold appetite has been burning brightly since the end of the pandemic and the start of the Ukraine war.

There exist many a reason for the world’s central banks to hold large reserves of the US Dollar. Inflation, US interest rates and the exceptionalism of its markets are but a few. However, the Dollar can often pale when the world hiccoughs, whereas Gold has always been the historical home to financial flight. While the western world and its politics wrestles with changes of government every four or five years, forward thinking is occluded, laws and policy flit and are only relevant while they remain warm on the breath of the words of promise. Not so in the land of China. ‘Thousand-year thinking’ is just that, a mentality of patience and long-term strategy. Markets assume China has front-loaded exports due to the likelihood of tariffs and has proven correct. If we allow that China does not shoot from the hip, adopting methodical practices toward the future then it should not be surprising how it maintains a heightened level of interest in Gold. According to analysts, the People’s Bank of China continued its acquisitions by adding 330k ounces in December taking its total stocks to some 2280t.

Historical relevance is not a peculiarity of China alone. The affinity with the yellow stuff is deep seated within the psyche of many of the Middle East’s nations. It has enjoyed centuries of cultural significance not only as an adornment, a statement of wealth, grand historical works of art but also as an economic staple. The laws of Islam mean the usual practices of wealth creation, including monies earned via loan interest are forbidden, whereas ownership of physical Gold has no such restrictions. With a cultural seat of the world enduring a war in its midst, there can be no surprise where its community expresses economic flight security. Even this history has history. Just before the First Persian Gulf War of 1980, Gold was trading $300 in 1979, it subsequently doubled to $710 on speculation of war and settled back to $550/troy ounce when Iraqi boots touched Iranian soil in September 1980. With such precedent in mind, the current multi-faceted, multi-national conflict in the Middle East will continue to secure Gold buying for some time to come.

The World Gold Council recently published its 2024 Gold Demands Trends Report and confirms why Gold’s price remains elevated. Total gold demand (including OTC investment) rose 1% year-on-year in Q4 to reach a new quarterly high and contribute to a record annual total of 4,974t. Annual investment reached a four-year high of 1,180t (+25%). The report offers how Gold jewellery saw a slump in consumption by 11% due to the affordability to consumers. Buying in Gold then is governmental, institutional and remains high on the must-haves of investment strategies.

The world’s peoples, caught up in doomscrolling and obsessed with the Bulletin of the Atomic Scientists’ ‘Doomsday Clock’ use the readings of how much trouble the world might be in as it nears midnight and the moment of Armageddon. Markets look at volatility indices and markers of fright flight. Gold, and the way it is now immeasurably linked with the geopolitical future of the globe, might just be a much more reliable ‘asset’, in all its forms of meaning.

The front month futures price of Brent finished 2023 at $77.04, it settled at $74.64 in 2024 and currently resides at $74.74/barrel as of Friday’s close. Price never lies, and while oil will be about its usual seasonality and ephemeral supply issues causing hikes in value, it does not have the scarcity, cultural idiosyncrasies and economic hardiness of Gold. This missive among many others will debate the heaves and haws of our magnificent and frankly more important market, but at present, it is safe to say that in terms of long-term price returns, investors will be served better elsewhere, particularly in Gold.

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