The long-term prospects for gold remain strong, and recent geopolitical shifts are accelerating those positive trends, according to James Luke, metals fund manager at Schroders.
Luke argues that former U.S. President Donald Trump’s tariff-driven trade policies are effectively challenging the traditional role of the U.S. dollar as the world’s reserve currency. By proposing tariffs tied to trade deficits, Trump signals a clear shift from prioritizing free trade to pursuing balanced trade, Luke noted.
“This can be viewed as a de-facto rejection of the U.S. dollar-centric global monetary regime,” Luke said in a recent investor note.
Gold prices have surged by more than $1,000 per ounce since breaking out in early 2024. The rally has been especially strong this year, with prices peaking at $3,150 per ounce in April.
Luke believes that the U.S.’s aggressive trade stance could prompt a wave of repatriation flows, as investors reevaluate the safety of dollar-denominated assets. With few credible alternatives, gold is poised to be a major beneficiary of this trend.
“In a scenario where strong central bank demand is joined by robust global investment demand, gold prices could climb significantly higher,” Luke explained. “Such an increase would be necessary to incentivize recycled supply and curb jewelry demand to maintain market balance.”
On the supply side, gold mining production has shown little response despite record-high prices. Luke highlighted that current mine supply remains roughly unchanged from 2018 levels.
“Just a year ago, projecting gold at $5,000 per ounce by the end of the decade seemed bold. Today, that target feels conservative,” he added.
Schroders also expects gold equities to see substantial earnings and free cash flow growth, potentially outpacing all other sectors in the broader equity market.
“No other major commodity is even close to its all-time real high,” Luke pointed out. “This is because gold is rallying as a monetary asset, not merely as a commodity.”
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