(Kitco News) - The gold market is seeing higher volatility, holding initial support at $3,300 an ounce as investors continue to navigate geopolitical and economic uncertainty; however, one market strategist said that gold still has room to move higher as it remains an attractive safe-haven asset.
In his latest report on gold, Bernard Dahdah, commodity analyst at Natixis, said it’s no surprise that gold has fallen from its recent all-time highs at $3,500 an ounce, as President Donald Trump has reduced his global reciprocal tariffs, implementing a base 10% duty on all imported goods.
At the same time, Trump has also shown interest in negotiating with China and potentially reducing his 145% tariffs on Chinese imported goods.
Although some tensions have eased, Dahdah said that they haven’t completely disappeared. He added that any new conflict will provide support for gold and potentially drive prices to $4,000 an ounce.
He added that the key for investors to watch will be U.S. Treasury markets and money market funds (MMFs), as gold’s opportunity costs are less important than its role as a safe-haven asset.
“As Trump rattles the global system and seemingly strangles globalization, the role of the U.S. dollar and U.S. Treasury as safe-haven assets is weakening,” Dahdah said in the report. “Recent data suggests the sharpest outflow from U.S. MMFs (chart 07, -$125bn, week 16 April) since the financial crisis, indicating a lack of trust in U.S. Treasuries. Our view is that this has come to benefit gold amidst a growing view that it is the only ‘traditional’ safe-haven asset left.”
“In our view, any continuous outflows from MMFs can benefit gold and eventually drive prices above $4,000/oz by the end of the year,” he added. “Ultimately, this will slow down the growth in gold prices. As such, we see prices averaging $3,150/oz for the year as a whole and $3,360/oz in 2026.”
Looking at gold’s downside in the current environment, Dahdah said that it looks like the precious metal is building another solid floor at $3,000 an ounce.
“It is still early days, but if China starts a continuous sale of U.S. Treasury holdings and/or if the outflows from U.S. MMFs continue on the back of U.S. Treasuries losing their safe-haven status, then that floor could be established,” he said.
Along with volatility in U.S. Treasury markets, Dahdah said that gold investors need to pay attention to Chinese demand. While Western investment demand for gold has picked up in recent months, Dahdah said that Chinese demand continues to set the price.
“Amidst Trump’s tariff threats, China’s gold appetite has risen sharply. This is quickly reflected in the Shanghai gold premium, which hit a record $137/oz (chart 04) amid Trump’s threats. Although the premium has dropped to around $62/oz, it remains elevated compared with the 15-year average of $5/oz, indicating strong Chinese appetite,” he said.
