Gold is trading an all-time high in all major currencies, with tariff fears, a weaker US dollar and bond yields all contributing, now Chinese insurance companies and Germany are also having an effect

11.02.2025

Overnight the price of gold futures rose to over $2,953 an ounce, with a growing number of global pressures adding to demand for the yellow metal.

The activity on the Chinese gold market appears to have stayed true to its seasonal pattern and it is suggested that there has been a follow-through of strong buying.

In China, it is reported that there is now a pilot programme allowing 10 insurance firms to invest up to 1% of their holdings in gold equivalent to a CNY 200bn or some $27bn in new demand.

This marks the first commodity that Chinese insurers have been explicitly permitted to invest in and the policy potentially signals that Chinese authorities recognise gold as an investment alternative as property sector struggles.

While focus is currently on the impact of President Trump’s first few weeks in office, with tariffs and bluster rocking markets, elections in Germany on Sunday 23rd February could also have far-reaching implications and could put further pressure on the US dollar.

Perceptions of gold have changed substantially over the past two decades, reflecting increased wealth in the East and a growing worldwide appreciation of gold’s role within an institutional investment portfolio – to $3,000 then $3,500 perhaps.

Gold’s unique attributes as a scarce, highly liquid and uncorrelated asset enable it to act as a diversifier over the long-term.

Gold’s position as an investment and a luxury good has allowed it to deliver annualised returns of 8% since 1971, comparable to equities and more than bonds and commodities.

Gold’s traditional role as a safe-haven asset means it comes into its own during times of high risk.

But its dual appeal as an investment and a consumer good means it can generate positive returns in good times too.

This dynamic is likely to continue, reflecting ongoing political and economic uncertainty, and economic concerns surrounding equity and bond markets.

The Ultimate Strategic Asset

The big question is whether the recent demand for gold will continue as we progress in 2025, especially with market uncertainty surrounding President Donald Trump’s fluctuating tariff policies causing ripples across global markets.

In 2024 the weight of Central Bank buying, which topped 1,000 tonnes for the third year in a row, helped to lift gold demand to record levels, with the gold price reaching multiple New Highs during the year, in turn weighing upon global jewellery consumption.

Pushing the recent rise in value are three main reasons – Central Bank purchases, Geopolitical Uncertainty and Inflation-hitting Interest Rates.

The Governments and Central Banks of China, India, Turkey and Russia have all pushed up their gold-purchasing rates as a protection against hassles with the US dollar.

Obviously, areas of global conflict have also been a major factor for investors to use gold as a safer portfolio balancer.

The Ultimate Liquidity?

Three factors set gold apart as an investment from most other commodities: it is indestructible, it is fungible, and the inventory of above-ground stocks is enormous relative to the supply flow.

Because of gold’s liquidity, it often acts more like a currency than a commodity.

Some Gold Facts

Around 187,200 tonnes of gold have been mined since the beginning of civilisation.

All the gold ever mined would fit into a crate 22 metres cubed, 4,000 of which you could fit into the Royal Albert Hall, or about the size of a concrete mixer lorry.

Over 90% of the world’s gold has been mined since the California Gold Rush.

The 40,000 or so miners who joined in the California Gold Rush in 1849 were called ’49- ers’ – sadly only a very small number of them ever got rich.

If all of the existing gold in the world was pulled into a 5-micron thick wire, it could wrap around the world 11.2 million times.

One ounce of gold can be stretched to a length of 50 miles; the resulting wire would be just five microns wide.

One ounce of pure gold can be hammered into a single sheet nine metres square.

It is rarer to find a one-ounce nugget of gold than a five-carat diamond.

There are just over 31 grams in a troy ounce of gold.

The temperature of the human body is 37 degrees centigrade. Gold’s conductivity of heat means that it rapidly reaches body temperature – one of the reasons it has become valued for jewellery.

Gold melts at 1064 degrees centigrade.

The boiling point of gold is 2808 degrees centigrade.

Gold is often alloyed with other metals to change its colour and strength.

Eighteen karat gold is composed of 750 parts of pure gold per 1,000.

At today's rate one tonne of gold is worth $83.2m or £67.2m.

A ‘London Good Delivery Bar’ which is the standard unit of traded gold, is made from 400 troy ounces of gold.

The US Federal Reserve holds 6,700 tonnes of gold, in 530,000 gold bars, however, at its peak in 1973, the Fed stored more than 12,000 tonnes of monetary gold.

There are 147.3 million ounces – around 4,600 tonnes – of gold stored in the US Bullion Depository at Fort Knox.

Even at only 10 parts of gold per quadrillion, the world’s oceans are estimated to hold up to 15,000 tonnes of gold.

Just think – one gold bar of 400 ounces is today worth over $1m.

Around half of all gold mined today is made into jewellery, which remains the single largest use for gold.

It is said that Julius Caesar gave 200 gold coins to each of his soldiers from the spoils of war in defeating Gaul.

The largest gold coin ever created was cast by the Perth Mint in 2012, weighing one tonne and measuring 80cm in diameter, it surpassed the previous record which was a C$1 million coin, just 53cm across, minted in 2007.

In My View

Now at over $2,940 an ounce, observers suggest an early push to test the $3,000 level and then further above.

For what it is worth, I see the price of Gold rising through to that level very soon, before it starts to creep even higher over the next few months.