Gold prices reached new record highs this week amidst rising geopolitical tensions. Wealth managers react.
Gold surged more than 2 per cent to all-time highs to just below
$4,900 per ounce on Wednesday morning. The all-time highs came
after US President Donald Trump renewed tariff threats against
eight European countries – Denmark, Norway, Sweden, France,
Germany and the UK – who have pushed back against his push to
acquire Greenland for the US.
Trump warned of escalating levies on those countries, which are
also NATO members, starting at 10 per cent in February and rising
to 25 per cent by June. He has also threatened 200 per cent
tariffs on French wine and champagne exports to the US.
Gold is seen as a safe haven, especially with concerns over
tariff-induced inflation, a slowing US economy, steepening
developed market bond yield curves, and a weaker dollar. Gold’s
rally to record highs has also been driven by structural demand
led by central banks in emerging economies. (See a
recent article here about forces driving the metal.)
“Analysts now openly discuss the prospect of $5,000 gold,
underscoring how stretched sentiment has become,” David Morrison,
senior market analyst at fintech and financial services provider
Trade Nation,
said in a note. “While gold has trimmed some of its intraday
gains, the broader backdrop remains supportive. These include the
possibility that the US dollar continues to soften, particularly
as the US Federal Reserve is expected to ease monetary policy
further this year. On top of this, persistent geopolitical
uncertainty continues to underpin the metal.”
“Silver, meanwhile, consolidated after approaching $96 per ounce
on Wednesday. While price action has cooled, silver continues to
benefit from haven demand and overall dollar weakness,” he
continued. “For now, gold dominates the narrative, but silver
continues in its role as a volatility-rich companion trade.”
Geneva-headquartered Swiss private bank Union
Bancaire Privée has also increased its exposure to mining
recently, highlighting the high demand for commodities such as
copper. This rising demand extends to silver and tin needed for
artificial intelligence, tech and renewables. Silver, which is
important for industrial demand for use in solar power and
electronics, is easier to access than gold. See
here.
All the major US stock indices fell sharply on Tuesday reaching
their worst daily session since October. It was the tech sector
which was hit hardest – ending the session down 2.9 per cent
– and this contributed to losses in the S&P 500 and the
Nasdaq of 2.1 per cent and 2.4 per cent respectively. Equities
slumped, while US Treasury yields spiked as investors trimmed
their holdings of US assets, including the dollar.
Mathieu Racheter, head of equity strategy research at Swiss
private bank Julius
Baer, also highlighted that equity markets sold off
sharply this week as US trading resumed, driven by renewed tariff
threats and a spike in volatility. Rising global bond yields, led
by Japan and partially spilling into US Treasuries, amplified the
correction. “While near-term risks remain prevalent, several
political, legal, and positioning constraints argue against a
repeat of last year’s sharp drawdown,” Racheter said. Against
this backdrop, he views the recent equity decline as a healthy
market correction following the strong, largely uninterrupted
rally since November.
Meanwhile, after the news of Canada and China striking a trade
deal on Friday, David Roberts, head of fixed income at Nedgroup
Investments, said the news took Canadian bonds higher to fair
value versus US Treasuries. He believes that there is still room
to rally but exited his position, moving from double weight to
neutral Canada. Should Canadian bonds perform poorly on the
current global bond negative moment, they’d be one of his top
picks to buy back.
Under the move, China’s president Xi Jinping and Canadian prime
minister Mark Carney announced lower tariffs. China is expected
to reduce levies on Canadian canola oil from 85 per cent to 15
per cent by 1 March, while Ottawa has agreed to tax Chinese
electric vehicle imports at the most-favoured-nation rate of 6.1
per cent. Carney has been trying to diversify trade away from the
US, following the uncertainty caused by Trump’s tariffs. The deal
could also see more Chinese investments in Canada.