Three golden tales as our world wobbles

Gold prices smashed a new record yet again on Monday, breaking past $3,100/oz.

Why?

The proximate answer is we’re now a day away from Trump unveiling his next tariffs on all countries (not just those with US trade imbalances) — and the related unpredictability is making it trickier for executives to plan, investors to trade, and consumers to buy.

So more folks are parking their cash in presumed safe-heavens like gold. But also…

• There’s broader volatility in the air (wars, tech disruption, political intrigue)
• That’s driving a longer-term hunger for safe-havens, and yet
• Uncertainty around America’s own trajectory is nudging more traders to stash their cash in other currencies like the yen and Swiss franc (both at recent highs).

So as the dollar records its worst quarter since 2022, gold — priced in dollars — goes up.

Anyway, while that all plays out, here are three intriguing gold tales we’re tracking:

1. Central banks are still hoovering up gold

They just bought more than 1,000 metric tons of gold for the third consecutive year, and look set for a four-peat in 2025. Whether it’s Turkey, India, or Poland, they’re all keen to:

• a) Hedge against currency fluctuations and inflation

• b) Maintain stability and credibility in their financial systems, and

• c) Diversify their vaults away from over-reliance on any single asset like the USD.

That last driver has really gained momentum since Putin invaded Ukraine — Biden’s move to wield the world’s dollar-reliance as a cudgel to hit Putin (via sanctions) startled some who fear being next. So it’s no wonder today’s top gold buyers include strongmen like Turkey’s Erdogan, India’s Modi, and China’s Xi.

Interestingly, the main exception in the top ten is Poland (at #1), though this makes sense when you remember a) it borders both Russia and Ukraine so it wants a buffer against any war spill-over, and b) it’s a NATO ally, so it wants any buffer against US equivocation.

And speaking of which…

2. Do some nations want their gold back?

It’s not just illiberal strongmen clutching gold.

Take Germany, which has the world’s second-largest reserves, but it doesn’t stash that gold in one big Scrooge McDuck pile underneath the Bundesbank. At least, not that we’ve heard? Rather, Germany diversifies by stashing half its gold abroad, with 37% ($120B) at the New York Fed, and 13% with British vaults.

But as Europeans rethink an America-first US, some previously-fringe calls are edging closer to power — Bundesbank chief Joachim Nagel, for example, is now having to swat away calls (🇩🇪) for Germany to bring its gold back from the US, assuring audiences, “I have complete confidence in our colleagues at the American central bank”.

But it’s intriguing he even feels the need to respond. As for those American colleagues…

3. Will the US revalue its gold?

There’s been constant chatter across DC and Wall Street that the US might re-value its gold holdings (the world’s biggest) from the old 1973 $42/oz benchmark to current $3,000+ prices — that’d theoretically deliver a ~$750B balance sheet boost that could help the US reduce its borrowing needs, and/or help fund Trump’s sovereign wealth fund.

But his treasury secretary (Bessent) has reiterated it’s not on the cards. He hasn’t said why, but our guess is he’s wary this kind of accounting trick would actually spook markets by a) seeming desperate, and b) not addressing the deeper US debt and deficit challenges.

INTRIGUE’S TAKE

It was JP Morgan (the guy, not his bank) who famously testified (💾) before Congress that “money is gold, and nothing else.” He was arguing that credit and even dollar bills all basically depend on someone else holding up their end, while gold — for reasons rooted in human history and psychology — has long carried inherent value that’s enabled the metal to hold its purchasing power across centuries.

Deep down, that all really goes to trust. Morgan used the term “character”. For him, if we humans can’t trust one another (his basis for all business), we can at least trust gold. But it’s worth keeping a couple other things in mind here:

• First, that doesn’t make gold infallible. There are already bears forecasting a major correction as high costs lead to lower demand and more supply, plus

• Second, the above three stories all (if inversely) eventually tie back to trust in the US and its place in the world: its trajectory, its predictability, and its dependability.

Also worth noting:

• Central banks now hold around one-fifth of all the gold ever mined.
• China’s central bank resumed gold purchases once Trump won in November — it’s likely a way to gird China’s financial system ahead of more US tariffs.