What This Strategic Move Means for Gold Price (Uncut) 03-27-2025

U.S. Understands Gold’s Value – What This Strategic Move Means for Gold Price | Joseph Cavatoni

Hey everyone, welcome back to Kitco News. I’m Jerry Safran. We’re watching gold hit a major milestone as it trades above the $3,000 an ounce mark.

And it’s a headline-worthy moment, but the real story lies in the economic forces driving this rally. In just 210 days, gold has surged from $2,500 to $3,000 an ounce, pushing it three standard deviations above 200-day moving average. Now, it’s a powerful momentum move.

But what’s next for these underlying drivers pushing gold prices higher? To help us break down, of course, is one of our friends, Joseph Cavitone. Of course, he is the Senior Market Strategist at the World Gold Council. Joining us from New York now.

Good to see you, Joe, as always. Great to be here, Jeremy. We’ve got a lot to get into.

You heard that. I mean, prices are still pretty steady here on the gold front. And, you know, it’s rose three weeks in a row, 15% year-to-date.

Now it’s facing some resistance around 3040 to 3050. So far, it’s struggled to break through those marks. Analysts say the market looks overstretched at these levels, and a healthy pause or maybe even a little pullback in gold’s core uptrend could be on the horizon.

I got to ask you, Joe, what are your thoughts on that? Well, I think that they’re all very interesting comments that are being made about the price. I think you hit the nail on the head, which is the rapid rise in price that we’ve seen over the last year has been quite telling that post-COVID, post-risk assets having some attention paid to them over those periods of time, moving interest rates, that people are gravitating back to gold to manage and mitigate increased levels of risks, whether it’s geopolitical or directly political here in the U.S., but also having implications on economies on a global scale, trade and economies. So people are moving back to the asset.

We’ve seen the price move through $3,000. I think you’ve hit that again. It’s a great moment for gold, but the case remains really strong for three of the four cases that we often talk to, central banks, investors, and, to a lesser extent, technology.

And it’s really seeing what develops on the consumer side, particularly emerging markets and their desire to have gold in the form of jewelry. So I think a lot continues to be strong in support of the price, but like we’ve seen a lot over the last year and a half, range-bound when we get through certain risk levels and through certain price levels. Yeah.

I mean, you brought up trade there, and obviously April 2nd is approaching quickly. That’s the date that the U.S. is set to unveil its plan for reciprocal tariffs on countries it believes are treating America exporters unfairly. Safe haven demand for gold may continue to rise here.

And at the same time, of course, you mentioned those elevated geopolitical risks that we have going on, and it could add, you know, to more fuel on the fire with, I guess, if the tensions remain high. Talk to me a little bit about how this will impact the gold market. Well, unfortunately, for every good soundbite we get on geopolitical risks, it seems to be met with one that’s challenging.

And I don’t think anybody’s having an easy go at trying to figure out how this is all going to play out. And when I say all of this, really just very aggressive moves by the U.S. administration to really level set and deal with a big challenge that we haven’t talked to just yet, but we can probably talk to more so later in the program, which is the U.S. debt levels and a need for it to raise money. So back to my point around risks and geopolitical and political risks, you know, if you hear that there’s potential for a ceasefire in Russia and Ukraine, that’s really exciting and very encouraging news.

But offset by, yes, that date of April 2nd, what’s it going to mean for Europe? Now there’s pressure on Europe to spend. There’s pressure on Europe to build up its own military stocks. It basically could be a good thing for Europe.

It could be a bad thing for Europe. But I think it still all needs to be digested by the market. Money moves quick.

And actually keeping risk on our headline and keeping confusing challenges on our headline, and that’s really what’s basically keeping gold as that safe haven asset that you’ve referenced in their portfolio and actually bringing back flows to ETFs. You know, we’re looking at a near $20 billion of inflows in the ETFs worldwide year to date, which is a big change in what we’ve seen over the last couple of years. Yeah, yeah, you’re not kidding.

Western investors finally coming back to the market too. I got to ask you, let’s go back to those tariffs because are you hearing about this tariff threat on gold? Is it still a threat? And can you remind the viewers if it’s ever happened in the past? So look, tariffs are definitely things that have been implemented over the years. We actually have come into this administration with actually existing tariffs on pharmaceuticals and other products for China.

So it’s nothing new and it’s nothing different. But I think the challenge is that they’re coming at us in a way that’s just super difficult to assess. So when you think about the tariff implementation, clearly it’s coming in a very aggressive pattern.

And I don’t think that at the heart of everything we’re hearing and seeing about what the administration’s concerns are primarily focused on. I think base metals are more interesting and more concerning. Critical minerals are more interesting and concerning to the administration.

Things that are directly linked to industries and in areas where the US feel it needs to basically protect itself. So I think you’re talking more along the lines of critical minerals that might be linked to defense, national security. Yeah.

So nothing on the tariff on the gold front then, Joe? You’re not hearing any of those types of rumors? Correct. We haven’t heard anything directly or specifically focused on gold. And I say that it’s actually interesting because gold in many ways is a monetary metal.

And we all know that. And it actually plays a very key role in investment portfolios. It plays a key role in technology.

But again, that’s a small component of our demand. And ultimately, I think what the administration’s on about is figuring out where risks and challenges exist with critical minerals or other base metals and how they can level set income streams, tax revenues, costs that go along with these different imports and exports. And those are the targets that we see mostly coming up in the headlines.

Now, one point I will make is that the administration has just put forward President Trump signed an executive order last week that was basically targeted at really looking at agencies to spend. This is happening too. While we’re looking at cuts, we’re looking at spending as well.

The agency is looking at critical minerals and other assets including potash and gold as an area where we could look at permitting onshore in the U.S. or development of industry onshore for production onshore. So it’s in the mix. Gold is in the mix.

But I don’t think it’s the subject of primary concern as it relates to import-export. And you can see from our historical numbers with the exception of what we’ve been seeing flowing into the U.S., the import-export levels are low for the U.S. and the gold market. It has plenty of gold to satisfy its needs domestically.

But I think at this stage, not really the focus and target of what the concerns are of the administration for tariffs. Okay. I’m curious about this.

And let’s stay on that theme because I wanted to get your thoughts on President Donald Trump’s recently invoking this emergency power to boost domestic production of critical minerals. Just to give a brief background to our viewers here, the executive order signed last week taps into the Cold War-era Defense Production Act, of course, framing America’s reliance on rival nations like China as a national security threat. Now, this is the latest effort by Trump’s administration to ramp up U.S. energy and mineral production, especially as trade tensions with China, Canada, and other key suppliers continue to rise.

But what I wanted to bring up with you is that Trump’s order includes support for gold production, even though it’s not officially classified as critical minerals by the U.S. Geological Survey. Why was gold included in this order? I think it basically signals pretty clearly that the administration understands the value of gold. And I think they understand the fact that it might not be critical as defined by the official terminology that the administration’s, both the Trump administration, the Biden administration, and now back to the Trump administration have identified.

What it does signal is they understand it as being strategic. And they also understand that there is a bigger game afoot when it comes to production, mining, et cetera, for gold. It’s not one single thing sitting out on its own, nor are any of these different minerals that come out of the ground.

You have to understand that mining is a complex business and actually opening up the ability for permitting and mining of gold could get you access to other assets as well. Antimony is a good example of that. And I think that you could look at this order and understand that the president, the administration, are understanding the interlinkings of different mining activities and production ideas, but also understanding, again, and signaling the significance of gold as a strategic mineral in the big scheme of things.

And it’s really quite important. Yeah, well said, well said, Joe. We’ve got to talk a little bit about the flows from the UK to the US.

I mean, obviously we’ve been hearing about that. And we recently heard from your colleague at the World Gold Council, Krishan Gopal, that Switzerland’s gold exports remain strong in February, keeping up the momentum from earlier this year. And the US once again led the way as its top destination with a noticeable pickup in exports to the UK as well.

And year to date, gold exports have hit 449 tons, the highest level that we’ve seen since 2012. Anything you can comment on these recent flow trends? So everything we’re saying about tariffs not necessarily being the target of gold or gold being the target of tariffs, what I can say is that whether they come down or not on April 2nd and they are broad based, gold will get caught in that net like everything else. So again, the futures market in the US is a market that has to rely on physical backing and an opportunity for that physical delivery to take place at the expiry of a particular contract.

Therefore, those that are trading over dates that are critical, futures contracts go out 30, 60, 90 days. Those that are trading for longer periods of time need to ensure that if they have a risk or an opportunity to deliver the physical, they need to have it in New York and that way they can price the instrument and the trading that they’re doing appropriately. So continue to see those flows come through until there is absolute clarity on exactly how tariffs will play out.

This European deadline of April 2nd, very important. That’s why you’re seeing the flows coming in still. But I think ultimately, it’s coming in at a slower pace.

Again, people are getting their head around the fact that we’re not necessarily the primary target. However, still important to make sure that your risk is managed. Therefore, the gold needs to continue to come to the US market.

So expect it to continue. Okay, so it hasn’t slowed down. I mean, it almost feels like it sure hasn’t.

Well, I think it’s coming in at levels, at paces that are slower than what we may have seen in the earlier stages of this phenomenon coming into play. So I think it’s definitely continuing, but I think it’s coming in at a slower pace. Okay, well, the World Gold Council also reported the global gold ETF saw a major boost last week with net inflows, as you just mentioned, hitting US$3 billion.

That’s roughly 31 tons of gold. And it marks the eighth straight week of inflows with North America accounting for nearly all of that demand. So far this year, total net flows have topped US$19 billion, or around 207 tons, putting us in track for the strongest quarter since 2022.

Joe, what does this tell you, my friend? Risk abounds, and investors are actually at the point where they’re saying it’s time to put money back into risk-protecting assets as an allocation of our portfolio, including in the US market. So of the US$19 billion, roughly, that we’ve seen, about US$12 billion has gone into the US. But again, we’re seeing flows in Asia and flows in Europe.

Also, people understanding, investors understanding, it’s time to continue with the allocations to maybe look to increase, which is what is new for us this year. Over the last few years, we felt that most investors were holding allocations for gold. I think the risks are high enough now, and they’re understanding that the economy is looking to be maybe stalling a bit.

And I think that they’re looking at gold as that hedge that they need back in their portfolio, whether it’s for inflation purposes or risk to just continue to put shocks to the system. If you just look at what we’ve seen in terms of risk assets over the last two weeks, really exciting, but really risky, and really moving fast, and actually having something that holds its value. Gold’s performed exceptionally well when we’ve seen risk assets coming off, whether it’s equities or whatever the case may be.

And you actually can use that as your safe haven to buffer that bit of risk in your portfolio, but also use it as your cash pool for a quick move when you want to buy a dip. So I think it’s actually front and center for people, and I think that the allocations look likely to continue over the course of the year. I think that Europe will probably pick up pace over the next six months as well in terms of the ETF flows.

Okay, so, I mean, the Western investor is back, and let’s just, you know, zoom out a little bit. I mean, historically, if the Western investor continues to come back, historically, what happens there? Is this just the beginning? Yeah, I think that it is the potential for the beginning. I think people are digesting the fact that with tariffs, with the changes to the economic outlook, that maybe this is a time for a weaker dollar.

Maybe this is a time for a weaker U.S. economy. You know, the numbers that we’re getting out right now are actually signaling that may be the case, but they aren’t necessarily the key critical data points that we want to keep a close watch on. But I think right now people are trying to assess whether or not this strategy that the administration is using will be good or risky for the economy.

And I think we just had a Fed that came and went with respect to a rate cut potential. They didn’t move. We don’t expect them to move.

Now they’re signaling maybe even less than two cuts, maybe one cut over the course of the year. So I think what we’re watching carefully is what this implication will be on the economy for the U.S. I think that’s why the U.S. are leading, and I think that’s why Europe will probably be looking at it next and make additional allocations to gold, to measure risks that are going to potentially develop in their region as well. Interesting.

I mean, we’ve seen that $3,000 price level. How important is this for the gold price? I mean, we’re talking about investors coming back from Europe and from the West. I mean, can this be the biggest driver here? I think it’s a really interesting point, and I think what is really critical for people to take into this consideration is that when allocations are made, they are made on the basis of how much percentage of portfolio should I basically put to work.

So I don’t think people are hung up on the fact that $3,000 has been reached and therefore they can’t move beyond it. I think investors are saying, what’s the right percentage for my portfolio? I think why they’re asking and what they’re looking at and what they’re trying to gauge right now is that we’re really up almost 15% year to date. Is there more headroom to go for gold? Will it continue to be continuing to raise in terms of its overall performance year to date? Will it continue to rise? And I think that the case remains strong, and that’s the messaging we’ve gone out with, which is investors are continuing to see the value.

Central bank paces of gold purchases are continuing to remain strong. We’ll have more color when we come into the end of first quarter and we get our demand trends report out on what’s happening on the consumer side. Probably looking to see that continue to wane a bit in terms of China, India, and global demand for jewelry.

But again, these two key case studies or these two key use cases for gold, investor and central bank flows continue to push the price higher. So like you said, while we might hit a bit of a flat spot on the price right now, the case remains strong for it to continue to be strong. So I think people are looking at the price that way.

So we’re through the 3000 mark. We look like we’re staying there. And I think at this point, we’re now talking about what’s the next level and how much more appreciation can the asset garner in terms of the look forward.

Yeah, let’s get into it. I mean, you know, our viewers want to know, I mean, what kind of price targets are you looking at for the end of the year? Because we have people like Bond King, Jeffrey Gundlach calling for $4,000 gold, of course, citing central bank demand. But what levels are you watching at a major resistance in this rally? I mean, is there a new price floor here? I think that we’re probably looking at levels.

And again, as the World Gold Council, we’re careful not to call the price. We have a view on demand trends and that’s really where we spend our energy and our focus. But there are industry professionals, Goldman Sachs, for example, putting a 3,100 level out.

I think others are reaching for 3,450, et cetera. I think what we need to see is the next catalyst for the market to really kind of make a big move up forward. And I think that that 3,100 level is probably the one that for me is most interesting.

If we reach that number and we reach that number before the first half of the year, that’ll be actually a really strong performance for gold. That might be the next resistance level that could develop over the next six months. And I think that really that’ll be putting us up near 20, 25% return on gold year to date, which is actually pretty extraordinary in terms of what we’re looking at.

But again, right now, we don’t see a lot of factors on the horizon that are looking to put downward price pressure on gold. That’s, I think, the most important thing that we can share with people is the case remains very strong for global investment, very strong for central banks, as I’ve said repeatedly. But then again, consumer side, really having less impact on the price, less impact on demand.

So let’s see how that starts to develop. Yeah, okay. I want to get into the retail demand too.

But before we do it, I’m curious going back to the central banks. I mean, with so many people citing central bank gold demand as a key factor driving gold prices higher, can you comment on the latest central bank gold purchases? I mean, what have you seen year to date? How significant are the moves? And more importantly, which countries are buying the most right now? Well, I think China remains strong in terms of their involvement. I think also Poland and other nations are actually out in the market making purchases.

I think Bolivia is also another nation that’s actually talked about adding gold to their reserves. But I think it really continues to be an emerging market trend. I think it continues to be pretty wide-ranged in terms of those that are continuing to be active.

And actually, interestingly enough, we’re seeing some that are actually talking about making use of their gold reserves to also just ensure that they have the right kind of economic conditions on shore. So right now, I think that the trend is continuing to see that these banks are actually purchasing, stepping in and buying. The Eastern developing nations are definitely at the game.

But they’re also reporting, which is actually encouraging because sometimes they may choose to not record or they may not necessarily report in a timely fashion. But I think that signal alone tells us that they’re comfortable and they’re actually very active in their involvement. Joe, are you keeping track of any repatriation moves here at all? Yes, we do keep track of that.

But I haven’t seen anything in the headlines and we haven’t noticed anything in the headlines that have been that substantial. Since I think the last time we spoke, it was possibly the Reserve Bank of India was doing the most to move its gold back home. Okay, let’s get back to that retail demand.

In Asia, it’s slowing down due to these higher gold prices. Reuters is reporting that jewelers across Asia and the Middle East say that more customers are rushing in, but not to buy, but to cash in their old jewelry and coins. And yet, retailers and experts warn if this selling spree continues, it could mean fewer imports into the market.

That eventually may be cool down gold’s rally here. What are your thoughts? Yeah, I would agree that higher prices tend to pause purchasing with respect to consumer spending on the jewelry side. And actually, we should qualify that there’s retail demand in the form of bar and coin, which actually is interesting for us to watch and keep a close eye on as well.

But as it relates specifically to jewelry, for sure. Higher prices tend to be stop the purchasing, and then the next move is actually look to move into recycling. Something we’ve already seen, it developed into the fourth quarter and throughout the course of 2024.

Not gonna be surprised if we see that trend continue into the first quarter, and it’s kind of signaling what we’ve been hearing so far, particularly in two markets, China and India. But again, those markets are moving, not only in the jewelry space, maybe a little bit of a slower demand, but they’re moving more along the lines of into more of an investment demand that’s picking up some of that slack. So again, we’re keeping a close watch on how much slowing we’re seeing from jewelry, how much that’s making its way into the recycled supply channel, and how much demand is picking up in each of those markets.

An interesting soundbite for China is that they’ve recently announced that the insurance companies, 10 top insurance companies onshore, are permitted to engage in a pilot program of investing in gold. And four of those insurance companies have actually just announced that they’ve gotten membership at Shanghai Gold Exchange, which is super exciting stuff. So you’re looking at a shift from jewelry being the real key driver, and now you’re looking at investment really taking on a lot more momentum.

So you have to keep both in mind. Again, slowing in jewelry, hand in pocket buying less jewelry, and in pocket saving a little bit more. Okay, let’s end on a positive note here.

You know, we’re talking about catalysts in this thesis behind gold. We’ve been talking about these inflows. I’m curious what you’re watching.

I mean, everyone’s been talking. They don’t want it to go up too, too fast. Obviously, that’s a little bit scary.

But what catalyst is the most likely one to get higher prices here? I think we need to see something very definitive coming out on the impact of tariffs on the U.S. economy. I think that those monies that are coming in in the form of ETF flows in the U.S. are giving us a signal that investors are back to the game. I’d like to see a little bit more clarity around how the economic conditions are going to develop, not only domestically in the U.S., but how it’s going to impact trade and the economies that are heavily reliant on it, Europe and the U.K. in particular, and actually see what that can mean for the outlook for risk assets and actually really how much flow is going to continue to come back, not only in ETFs, but in the physical market, the OTC market, which we know is much more substantive, but actually trades OTC, so it’s a little harder for us to see it until the end of the quarter.

Right, yeah, well said. Well, we’re watching April 2nd here very, very closely, as you can imagine. Joseph Cavitone is, of course, the Senior Market Strategist at the World Gold Council joining us from New York.

Thanks for this, my friend. Always great to see you. Thanks for having me.

It’s great to be here. Thanks, Joe. And thank you for watching.

If you found this conversation valuable, don’t forget to subscribe and turn on your alerts. We bring you the voices shaping the gold market and the global economy only here on Kitco News. I’m Gerry Safran.

We’ll see you next time.