The experts predicted a golden year, but they didn’t anticipate the “Trump disruption”. Bullion analyst Sanjiv Arole dissects how a single presidency has rewritten the rules for precious metal fortunes.
Everyone is aware of the mythical Greek `King Midas’ and his legendary golden touch. Inadvertently and somewhat inexplicably Trump appears to have become the modern Midas – The Man with the golden touch. For, almost all his initiatives appear to have aided and abetted gold to scale all-time high levels repeatedly over the last month or so.
President Trump began his second innings at the White House in a tear away hurry at breakneck speed. He has signed innumerable executive orders that no other US president has signed in the first month of his presidency. His aim of ‘America first’ was seen in his first salvo of trade sanctions against Mexico, Canada and China. However, he deferred it against the first two till March 4, 2025. He imposed 25% tariff on steel and aluminium imports and also threatened reciprocal tariffs on other products as well from foreign countries that had a positive balance of trade against the US. He painted friends and foes alike and ready to disrupt global trade pacts. He walked out of Paris talks as well as the WHO and cut off all aid from USAIDS. He turned the very basis of the Ukraine war, not only called Zelensky a dictator but also the one who began the Ukraine war.
Trump held a peace initiative with the Russian at Riyadh without Ukraine’s presence and also saying that Ukraine had no future with NATO. Thereby, almost pitting Europe (sill favouring Ukraine) and the US, on opposite sides of the Ukraine war. The US is also readying itself for a long and brutal trade negotiation with the EU. Trump initiated US into the Israel-Hamas peace process and wanted US presence in Gaza to ensure peace in the region; however, this offer was rejected by all parties involved, including Israel. In his quest for America first he wanted Canada to join the USA as its 52nd state and wanted control over Greenland. He wants control over the Panama Canal and renamed the Gulf of Mexico as Gulf of America. All and many other moves on immigration, cut in government expenditure and spending, etc., was all to make America strong and enhance USD’s acceptance as the global currency of trade and thwart all attempts to help the nascent bricks currency to survive.
Whether Trump’s initial attempts to make America regain past glory and become the all powerful centre of the world is still too early to say. However, its moves appear to have benefitted gold in a big way. Consider the following: (a) Bitcoins: Trump has always supported crypto currencies and after being elected as president came out with full support for Bitcoins and other cryptos and even removed all governmental controls and gave a free hand to the private sector. However, Bitcoins that was around $109,114 on the day of Trump’s inauguration on January, 20, 2024 fell by around 12% from its peak levels to $96,219 on February 23, 2025. (b) Even the Dow, which peaked above 45,000 after the inauguration has now slipped below the January 17, 2025 level of 43,487.83. (c) The US dollar index that was at a high of 109.35 on January 17, 2025 has decline by nearly 3% to 106.34. As a result, the USD weakened against major currencies. (d) In India, the BSE Sensex too declined from around 77,703 to 75,737 after the Trump inauguration. The Indian rupee that declined sharply to Rs.87.58 against the USD after January 20, recovered to Rs.86.55 as the USD lost ground.
At the same time, gold that was at$2,707 per ounce on January 20, 2025 (London pm fix) scaled fresh all-time highs repeatedly reached a recent all-time high of $2,955.60 per ounce on February 20, 2025, up by over 9%. It ended the week around $2,934.15 per ounce range (London pm fix). February 24 saw gold even scale yet another all-time of $2959.80 per ounce in a day of volatile trading, with a low of around $2921 per ounce before ending in NY around $2954-55 per ounce. Silver too gained by around 9.2% over its January 20 level of $30.26 per ounce. It ended the week around $32.93 per ounce (London fix). It also briefly scaled $34 per ounce as well.
Therefore, at the moment gold appears to be holding all the aces and surging ahead greatly benefitting from Trump’s policies. The markets are volatile and gold appears to have taken into its stride even the Federal Open Market Committee (FOMC) minutes reading wherein it is apparent that rate cuts could be enforced later in the year and that too just one or two in 2025.
In the midst of all the drama and noise during the first month of the Trump presidency came the 2025 LBMA Annual Precious Metals Forecast Survey. The 30 analysts submitted their entries on 13th January getting precisely 8 trading days to determine their forecasts. Their task was cut out given the fact that actual action in the global markets began only after the 20 January 2025 Trump inauguration. They were asked to identify key parameters on the basis of which they would make their forecasts. The parameters identified by them were: US Fed policy (26%); Central bank demand (21%) and Geopolitical risks/uncertainty (15%).
The forecasts made on various precious metals were as follows: (i) Gold: The analysts collectively predicted that average gold price for 2025 would surpass the actual average gold price of $2,386.20 per ounce for 2024 by 14.7% to $2,736.60 per ounce. The most bullish high was $2,925 per ounce and most bearish one was $2,500 per ounce. However, the highest price predicted was $3,290 per ounce while the lowest price predicted was $2,250 per ounce. (ii) Silver: For silver, the analysts predicted an average price of $32.86 per ounce for 2025, 16% higher than the actual average price for 2024. The most bullish average price predicted was $36.50 per ounce, while the bearish average price prediction was $28.25 per ounce for 2025. The highest and lowest price predicted for silver in 2025 was $43.50 per ounce and $24 per ounce, respectively. Likewise, the average price predicted for platinum for 2025 was up by 6.89% over the actual average price for 2024 and for palladium it was predicted to be up by just 0.75% for 2025. Here, a further detailed analysis of prices in both the PGMs is left aside. For, the focus is mainly on gold and silver for a more detailed analysis in future.
Probably, the analysts should have another parameter to aid them to predict precious metals prices in 2025. The Trump disruption factor should be factored in to make price forecasts nearer the mark. The ability of Trump’s policies to create a great deal of uncertainty in global markets is clearly felt even in the first month of his presidency. In gold, the esteemed analysts forecast an average gold price of $2,736.69 per ounce in 2025. However, the actual average gold price till 21 February 2025 is $2,800.49 per ounce. The story is similar for silver as well. It would be very difficult to predict whether this gap would widen in the remaining period of the year or take a complete U-turn in price trends. Trump brings in unpredictability, instability, disruption and uncertainty to the global markets making the future hazy.
Elsewhere, India’s silver imports aggregated over 7,000 tonnes in the first nine months of calendar year 2024 this included around 2,900 tonnes in the first two months of the year and over 2,500 tonnes in September 2024. This was compared to over 3,600 tonnes for the full year 2023. As a result, silver imports are easily more than double of last year. But, as acknowledged by government agencies of some double counting in import number due to set up of a new system in data collation silver imports too faced a downward revision. Taking all that into consideration silver imports for 2024 are likely to be around 8,000 tonnes. However, this huge additional supply cannot simply be apportioned to various demand segments. Way back in 2011, when silver nearly reached $50 per ounce and crossed Rs.70,000 per kg in the Indian markets, Indians hoarded the white metal in anticipation of the price scaling Rs.1,00,000 per kg. That hoarded silver only partially surfaced in the Indian markets during Covid-19 times when the silver price was near the Rs.73,000 per kg region. Is history repeating itself? For, even when silver was around Rs.97,000 per kg and briefly threatened Rs.100,000 per kg there was no huge scrap silver being offloaded to make profits. Are Indians still hoarding more silver for speculation?
Then, India is in the forefront of solar energy and solar panels are in great demand. However, that would not translate into huge demand for silver in the domestic industry for much of India’s solar panel requirement is met by imports from China. Its dependence was around 85% not so long ago and could be around 60% recently. India also depends on imports of photovoltaic cells (50%) as well. Therefore, even though industrial demand for silver is pretty high it may not make up for the rise in supply. It seems unlikely that silverware and silver jewellery could match huge increase in silver supplies. In recent times, there has been a high incidence of silver jewellery exports. But it is a matter of conjecture on the nature of these exports. It would seem that much of the increased supply of silver could be for investment purposes or for speculation, in short hoarded for better times.
Meanwhile, news, speculations and rumours are swirling around the gold markets. There is talk that the US Fed would monetise its assets to improve its balance sheet. There is speculation that the Fed would revalue its 8,133 tonnes of gold and even there would be auditing of the Fed reserves. Further, that the whole exercise would entail $750 billion after revaluation of the 8,133 tonnes of gold. Some say that this would not be enough to make any real change to the $33 trillion plus US debt scenario. There are rumours and speculations that the US government and the Fed are making a grand plan to devalue the USD, make is exports competitive and bring into force a new monetary world order backed by gold with US on top again. Moreover, there are rumours emanating from London that the Bank of England is set to default as it taking between 4-8 weeks to shift gold to the Comex in New York. And another speculation that the gold in NY would remain there for long and would only be shifted when there are premiums on gold in Asian markets on demand for gold there. The bottom-line is that amidst all the chaos gold could reign supreme.
Finally, not so long ago, anybody talking about gold at $2,000-$2,500 per ounce was considered a gold bug, weird or plain mad. Now, $2,500 is passé and even $2,700-2,800 per ounce considered normal. With gold within $50 off $3,000 per ounce, the analyst who predicted gold at $2,250 per ounce in the 2025 LBMA Annual Precious Metals Survey may well be asked to stand outside the door!
In 1996, the then Fed Chief Alan Greenspan coined the term ‘irrational exuberances’ to explain some stock market behaviour that had caused gold to jump. Now, you have Trump!!