As 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. This 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 measures to
acquire Greenland for the US.
Trump warned of escalating levies on these 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. The
European parliament suspended the ratification process on its US
trade deal on Wednesday evening, as a result. The tariff threats
have since been taken off the table after a meeting between Trump
and secretary general of Nato Mark Rutte on a potential deal
on Greenland.
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.
“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
that was hardest hit, 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 how 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, highlighted that 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 would be
one of his top picks to buy back.
Following 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 March 1, 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 on-off tariffs.
The deal could also see more Chinese investments in Canada.