Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Chief Macro Strategist
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Gold and silver see fresh gains as Trump 2.0 era begins
Ole Hansen
Head of Commodity Strategy
Key points in this update:
- Gold and silver have both benefited from the increased uncertainty caused by a wave of Trump announcements
- A softer dollar, combined with the potential inflationary impact of a global trade war, is seen as supporting drivers
- Gold trades near last year's record high, while silver has returned to challenge resistance around USD 31.
- We are seeing USD 2900 and USD 38 as potential upside targets this year amid continued investor demand.
Gold and silver prices have both benefited from the increased uncertainty caused by a wave of Trump announcements following his inauguration, including tariffs, with investors also evaluating their inflationary impact and effects on monetary policies. The latest run-up in prices—in gold to an 11-week high near last year’s record, and silver towards resistance around USD 31—was triggered by Trump’s threat to impose tariffs on some of its major trading partners, including Canada, Mexico, Europe, and China.
In addition, the possibility of tariffs on imports of key metals traded on the New York futures exchange has caused significant market uncertainty, uprooting normal price spread relations between spot and futures prices in the short term. Under normal circumstances, this difference reflects the cost of carry, transportation, and storage. However, the risk of tariffs has driven up premiums for futures deliverable in New York, thereby adding another layer of support on top of the general support driven by uncertainty and a softer dollar.
The Dollar Index futures, which reflect the performance of six major currencies against the dollar, started a strong uptrend in late October, now showing signs of pausing. This development has added some support to gold and silver—two metals that, despite this headwind, have rallied strongly during this period, resulting in record high gold prices being reached against multiple currencies.
Gold has rallied strongly this week, with the move accelerating after breaking resistance—now support—at USD 2,725, clearing the path to retest last year’s record high at USD 2,790. In our recently published Q1 2025 outlook, we reiterated our long-held bullish view on both gold and silver. Demand for investment metals continues to be fuelled by an uncertain geopolitical landscape, where global tensions and economic shifts have led investors to seek safer assets. With Trump 2.0 upon us, this development shows no signs of fading, given the potential risks of tariffs causing inflation to move higher and the dollar eventually weakening, thereby removing an obstacle standing in the way of further gains.
Central bank buying looks set to continue, thereby providing a soft floor under the market, as they seek to diversify away from the USD and USD-based assets such as bonds. Together with concerns about mounting global debt, particularly in the United States, investors continue to seek a hedge against economic instability by turning to precious metals, including both gold and silver.
While investment-driven factors will continue to play an important supportive role for silver, its price dynamics are also closely tied to its industrial uses, from which it derives more than 50% of its total demand. In 2024, increased industrial demand has helped create physical tightness in the silver market. Sectors such as electronics and renewable energy, particularly photovoltaic (solar) technologies, have significantly contributed to this surge. The expectation of sustained industrial demand is likely to keep silver in a supply deficit into 2025, potentially deepened by a pick-up in ‘paper’ demand through exchange-traded funds. This dual role—balancing both investment and industrial demand—could enable silver to outperform gold in the coming year.
Silver continues to recover from the deep end-of-year correction that saw the white metal tumble 17% from a 12-year high at USD 34.87 to a December low at USD 28.74. Besides renewed demand from wrongfooted short sellers in the futures market at the start of the year, prices have also been supported by the factors driving gold higher, as well as the fundamental outlook for a fifth consecutive annual supply deficit. A break above USD 31.08—the 0.382 Fibonacci retracement—may see the metal target USD 31.80 next, while a break above USD 32.53 is needed to send a technical signal of a return towards last year’s top.
We forecast a potential decline in the gold-to-silver ratio, which currently trades above 89, possibly moving towards 75—a level seen earlier in 2024. If this occurs, and with gold reaching our current forecast of USD 2,900 per ounce, silver might trade above USD 38 per ounce, both well above the cost of carry.
Recent commodity articles:
20 Jan 2025: Podcast: Trump 2.0 swings into action
20 Jan 2025: COT Report: Elevated commodities longs face short-term risks
17 Jan 2025: Commodities weekly: Strong January rally pauses ahead of Trump
17 Jan 2025: Podcast: Brace for Monday, as a new era begins
15 Jan 2025: Q1 2025 Commodity outlook: A bumpy road ahead calls for diversification
14 Jan 2025: COT Report: Hedge fund long jumps to 17-month high led by crude, gas and metals
13 Jan 2025: Crude oil rally amid winter demand and Russian sanctions
10 Jan 2025: Commodities weekly: Strong start to the year led by energy and metals
7 Jan 2025: COT Report: Managed money's year-end positioning in forex and commodities
20 Dec 2024: Silver's resurgence in 2024: A precious metal with an industrial edge
17 Dec 2024: Investors cash in: Gold and silver see year-end profit taking
17 Dec 2024: Podcast: A wild ride in 2025 awaits
16 Dec 2024: COT Report: Agriculture in demand; Traders lift bets against the euro
13 Dec 2024: Commodities weekly: The forward curve and impact on returns
10 Dec 2024: Brazil's coffee crisis pushes Arabica to all-time high
9 Dec 2024: COT Report: Speculators bought crude and gold: euro shorts reach 4-year peak
6 Dec 2024: Commodities weekly: Copper rises on China optimism; OPEC delay signals crude weakness
3 Dec 2024: COT: Mixed week in commodities as dollar buying continued
29 Nov 2024: Commodities take a breather after action-packed November
28 Nov 2024: Coffee surges to a 47-year high
28 Nov 2024: Choppy gold market turns to Santa for December support
27 Nov 2024: Podcast: Will gold enjoy a Santa rally for the eight year in a row?
25 Nov 2024: COT Report: USD long jumps; Mixed week in commodities
22 Nov 2024: Commodity weekly: Strongest performance since April
19 Nov 2024: Gold and silver rise on Russia-US tensions
18 Nov 2024: COT: Limited dollar demand despite strength; Acclerated metals selling
11 Nov 2024: COT: Speculators bought energy and grains, sold gold ahead of elections
8 Nov 2024: Commodity weekly: Mixed response to Trump 2.0
6 Nov 2024: Podcast: US election and the market reactions, including commodities
6 Nov 2024: Trump and Republican victories spark commodity decline
4 Nov 2024: COT: Speculators flock to dollars, exit commodities ahead of US election
1 Nov 2024: Commodity weekly: Some weakness seen ahead of critical week
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