(Kitco News) - Although a global trade war appears to have been averted for now, it hasn’t calmed the gold market. One market strategist said that geopolitical instability will continue to support gold prices through 2023.
In an interview with Kitco News, Joy Yang, Global Head of Index Product Management at MarketVector, said that even with gold at an all-time high above $2,800, it has room to run higher as geopolitical uncertainty is not going away. Spot gold last traded at $2,842.30 an ounce, up nearly 1% on the day.
Even as President Donald Trump has delayed his tariff threat against Mexico and Canada for 30 days, Yang explained that gold’s new safe-haven bid is bigger than a couple of trade disagreements.
“The president ran on an agenda of disruption, so he’s going to use shock and surprises because that is to his advantage in these negotiations,” she said. “It’s not just about specific tariffs or whether they happen or not. At some point, another surprise will emerge that markets aren’t prepared for,” she said. “Markets just don’t know how to navigate this environment, so it makes sense for gold prices to remain above $2,800 per ounce.”
But geopolitical uncertainty is not the only factor driving gold prices. Yang said that gold will be an important portfolio diversifier as investors continue to adjust to shifting expectations in the tech sector after China unveiled a cheaper AI product.
She pointed out that with equity valuations near historic levels, investors are already on edge, so it's not surprising that there is growing demand for a defensive asset like gold.
“When you don’t know what is going to happen, you want to look for something that isn’t going to be impacted by the same surprises and drivers, and that is gold. The metal will do its own thing, and that is good,” she said.
Yang said that gold is the ultimate safe haven because of who is buying it, as gold’s rally through 2024 was driven by solid central bank demand. Yang added that she expects central banks to continue increasing their exposure to gold.
Although investor demand and speculative interest are expected to create some volatility in the gold market, Yang said that the broader trend remains upward.
“The gold market has this strong foundation from central bank demand, and that will continue to drive prices,” she said. “ It's still a solid environment for gold demand, and I don't see that going away this year. So I certainly think gold hitting all-time highs will likely continue,” she said.
While much attention is focused on gold as a safe-haven asset, Yang said she also sees potential for silver.
“Investors are definitely looking for some safety, but they are also looking for value, and silver has been undervalued for a long time, so I think there is some potential there,” she said.
