Uncertainty fuels gold’s soaring run

'Uncertainty' is the key word behind gold prices as they continue their strong upward run, according to industry consultants Surbiton Associates. The Australian dollar price for the 'safe haven' metal sat above $4578/oz early this morning (Feb 6), while the price in US dollars stood at $2882/oz. Surbiton director Dr Sandra Close said the introduction of newly inaugurated US President Donald Trump to the mix added another layer of uncertainty amid existing global issues such as conflict in the Middle East and Ukraine. "Of course, it's not just Trump. One of the notable things is that some of the central banks have been buying - that's always an interesting sign when some of those central banks in different countries will plow some funds into gold to give themselves a greater cushion if you like," she said. However, the enormous rise in price is still failing to flow through to the value of shares in companies involved in Australian gold production and exploration. "You might say investors seem to be going more for physical gold or maybe ETFs (exchange-traded funds) here and there rather than the stock market itself," Dr Close said. "Obviously it's getting to the point of FOMO - fear of missing out, whether it's individuals or organisations and investment firms, whatever. "A lot of them seem to be going for gold, but they don't seem to be going for shares in the same way as physical gold." Nevertheless, a soft Aussie dollar means Australian producers are reaping the benefits of high returns right now. Below: Global gold demand 2024. The World Gold Council's latest full-year report shows gold demand rose 1 per cent year-on-year in the last quarter of 2024 to reach a new quarterly high and contribute to a record annual total of 4974 tonnes. Central banks were a major driver, with buying exceeding 1000 tonnes for the third year in a row. The LBMA (PM) gold price reached 40 new record highs during 2024. The average Q4 price of $US2663/oz was a record and yielded an annual average price of $US2386/oz (up 23 per cent). The World Gold Council expects central banks to stay in the driving seat moving forward and gold ETF investors to join the fray. It believes the following developments are likely in the four major gold regions: A soft landing in the US with intermittent risks of overheating. Interest rates recede slowly but it’s a bumpy ride. The US dollar on course to decline European growth remains weak but benefits from both lower inflation and rates in the latter half of the year; any additional pickup in Chinese growth can provide a welcome boost to exports China continues to battle weak domestic activity but could improve on continued stimulus measures that have seen a nascent recovery in retail and property sales India sees slowest growth in four years – albeit higher than most regions – accompanied by a welcome decline in interest rates and inflation.

Uncertainty fuels gold’s soaring run

Industry Queensland

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