Gold Fever Is Escalating

Gold prices have rallied 2.6% this week to $3,322 per troy ounce, extending a powerful uptrend driven by geopolitical uncertainty and growing expectations of monetary easing in the United States. The metal has climbed 21% since November 2024, largely fuelled by sustained buying from the People’s Bank of China amid escalating trade tensions with the U.S.

According to a recent Bank of America survey, 42% of fund managers now expect gold prices to rise further in 2025, up sharply from just 23% when prices hovered near $3,000 in March. The shift in sentiment comes as the Federal Reserve edges closer to cutting interest rates, with investors anticipating action as early as June following the S&P 500’s 21% decline from its recent peak.

Despite signs of a stock market rebound, expectations for monetary easing remain intact. An emergency Fed meeting last week reportedly explored scenarios for rate cuts should equity markets resume their slide. A further 5–10% drop in the S&P 500 could be the tipping point, analysts suggest.

Investor positioning reflects growing confidence in gold’s resilience. The SPDR Gold Trust (GLD) reported $2.03 billion in net inflows last week alone, as institutional players increased their exposure following confirmation of softening U.S. inflation data. The metal has surged 10% in the past ten days.

Technically, however, the rally may be overextended. Some analysts warn of a potential correction back toward $3,000 per ounce if momentum fades, particularly if macroeconomic conditions shift.

Meanwhile, geopolitical uncertainty continues to provide a bullish backdrop. President Donald Trump escalated rhetoric this week, threatening to raise tariffs on Chinese imports to 245% unless Beijing reduces its retaliatory levies. While the stance appears aggressive, analysts believe both sides have little room for further escalation and may be inching toward negotiations.

Still, the onset of trade talks could limit gold’s upside. If the U.S. and China ease tensions, risk appetite would likely return to equities, and the need for Fed intervention could diminish. That could take the wind out of gold’s sails—at least temporarily.