Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Gold’s deleveraging pullback fails to shake supportive outlook
Ole Hansen
Head of Commodity Strategy
Key points in this update:
- Gold and silver seeing some demand emerging following one of the worst three-day risk reduction periods in recent years
- A three-day sweep saw silver give back all its strong Q1 2025 gains, while gold’s correction from a fresh record has been relatively shallow
- A combination of heightened global economic tensions, the risk of stagflation, a weaker dollar combined with falling US real yields as inflation expectations rise, will in our opinion continue to support bullion, and to a certain extent also silver
Spot gold’s initial response to last week’s announcement of the steepest US trade barriers in more than 100 years was a move to a fresh record high of USD 3,167 per troy ounce on heightened inflation risks. However, surging volatility in response to collapsing stock markets turned the attention to capital preservation and deleveraging—a focus that hurt all leveraged positions, including those in silver, and not least bullion, which is often considered a safe haven during times of turmoil. As volatility surged and losses mounted, leveraged traders—such as hedge funds—were forced to reduce their across-the-board exposure. During periods like this, the overriding focus is on bringing down risk and staying liquid enough to meet any margin calls in loss-making positions. As the dust begins to settle following one of the worst three-day risk reduction periods in recent years, some demand for both gold and silver has emerged. While the correction in gold has been orderly and within expectations following a record run higher, the 16.5% top-to-bottom, three-day slump in silver has been brutal. Most of the damage was inflicted by a combination of economic growth concerns—as silver derives around 50% of its demand from industrial applications—and a collapse in the COMEX futures premium on speculation that silver, like bullion, would be exempt from tariffs. A three-day sweep saw silver give back all its strong Q1 2025 gains, in the process breaking the uptrend from early last year and the 200-day moving average, while briefly trading below the December and January lows. The gold–silver ratio exploded higher, hitting levels above 100 ounces of silver per one ounce of gold—levels last seen during the 2020 pandemic spike. In the short term, heightened recession risks and worries about industrial demand may prevent silver from recovering to its recent XAUXAG range between 75 and 92. For XAGUSD, a move back above the 200-day moving average (green line), last at USD 30.90, is needed to signal calmer price action.
Gold’s safe-haven role temporarily received a setback with spiking volatility driving another burst of deleveraging similar to, but so far nowhere near the same scale seen during the early stages of pandemic panic back in 2020 when gold over a ten-day period slumped by 13% before recovering strongly as inflation worries and stimulus helped create fresh demand. Gold prices hit a record high last Thursday before the mentioned deleveraging helped drive a 6.7% top to bottom correction. However, the combination of heightened global economic tensions, the risk of stagflation, a weaker dollar combined with falling US real yields as inflation expectations rise, will in our opinion continue to support bullion, and to a certain extent also silver. Adding to this a market that is now aggressively positioning for the Fed to deliver more cuts this year—at current count almost 100 basis points of easing by year end. The recent transfer of gold from around the world to US warehouses monitored by the COMEX futures exchange in order to get supplies behind a potential tariff wall may now see a part reversal after bullion was made exempt, potentially weighing on prices in the short term. With all the mentioned developments in mind, we maintain our forecast for gold reaching USD 3,300 this year, and given a potential recession risk impacting industrial demand for silver, and based on a gold-silver ratio at 88 we lower our silver target to around USD 37.5, from above USD 40 previously. Gold’s correction from a fresh record has once again been relatively shallow with several key levels of support yet to be challenged. The most important in our opinion being an area around USD 2,950 which apart from being the February top also represents a 0.382 Fibonacci retracement of the run-up from late December. A rejection before and at this level would signal a weak correction within a strong uptrend.
When we look at developments supporting gold - and silver due its semi-precious link - we focus among others, on:
US Fed Funds rate expectations: Market participants closely watch interest rate expectations set by the Federal Reserve, as they heavily influence the attractiveness of gold. Currently, the futures market is pricing in the possibility of a 75–100 basis point rate cut before year-end, suggesting a more accommodative monetary policy. Lower interest rates reduce the opportunity cost of holding gold (which doesn’t pay interest), thereby supporting its price.
Investment demand for “paper” gold through futures and exchange-traded funds (ETFs): The demand for gold-backed financial products depends on technical market factors, such as price momentum, as well as macroeconomic indicators. In addition, a key factor for investors in ETFs is the cost of holding a non-yielding assets like gold, with the prospect for lower funding cost boosting demand.
Rising US inflation expectations: Investors often turn to gold as a hedge against inflation. Recently, falling real yields (nominal yields minus inflation expectations) across the US Treasury yield curve have signaled growing concerns about future inflation. As inflation expectations rise, the real return on fixed-income assets decreases, increasing the relative appeal of gold.
Rising geopolitical risks: Global instability tends to push investors toward safe-haven assets like gold. A recent correlation between defense stocks and gold suggests that as geopolitical tensions rise—such as conflicts, wars, or diplomatic strains—investors seek safety in gold, thereby supporting its price.
Central bank demand amid continued focus on reducing dependency on the USD: A growing number of central banks are diversifying their reserves away from the US dollar, often turning to gold as a neutral reserve asset. Notably, China, India, Turkey and Russia have been leading this trend. According to official data, the People’s Bank of China (PBoC) increased its gold reserves in March for the fifth consecutive month, underscoring sustained institutional demand.
Five-year historical charts of the referenced commodities are provided for compliance purposes.
Recent commodity articles:
7 April 2025: COT Report: Hedge funds' positioning ahead of Calamity Wednesday
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in
24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally
21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge
18 Feb 2025: COT report: crude, gold and grains see mild profit taking
5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
Podcasts that include commodities focus:
4 April 2025: Markets melts down as recession risks go global
1 April 2025: Bracing for Liberation Day
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
25 Feb 2025: Meltdown risks are rising. What to watch next
18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated?
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
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