Dear beloved readers, The time has come. I can no…
Dear beloved readers,
The time has come. I can no longer escape it. But, we have to talk about gold.
The reason why I have put this off for so long (2 weeks) is because I thought my thoughts on gold would come across like this.
However, with everything going on in the world right now, the fundamentals behind gold are stronger than ever. The uncertainty, the restructuring of the world order, and the cracks in the US dollar as the reserve currency of the world, are all tailwinds in the value of gold.
Last week, I mentioned the potential overhaul of ISAs and how each of our capital allocations are unique to us. To follow on this, we will be focusing on the D-word. No, it doesn’t rhyme with Nick but it is, drumroll please, … Diversification!
For the past few years, many of us who wish to put our money to work have been up to our knees in US stocks because of its seemingly never ending upward trajectory. They were so untouchable at a given point in time that they were given a name that almost rivals Marvel’s Avengers: the Magnificent 7! It’s probably quite fitting seeing as the Tesla CEO genuinely sees himself as a real life superhero.
Nonetheless, as an investor, if you weren’t overweight in the US market you were mad!
Recent events in the Oval office have resulted in trillions of dollars leaving the US markets and anyone with eyes and ears have seen a lot of red on investment platforms. The “will they won’t they” tariffs from Trump, the US debt problem, and the potential return of European exceptionalism, practically all the things I said that are driving the gold price up, are all headwinds in the US equities story.
The reality, however, is that Trump is the dealer in the global game of blackjack. A single tweet or comment to reporters is enough to significantly shift markets.
Trump dictates what happens to stocks and US Treasury bond yields so much so that CEO of metals trading firm Trafigura “semi-seriously” considered changing Swiss working times to 2pm to midnight to accommodate Trump’s announcements because a simple tweet could unwind a lot of the trades made that morning and cost them a lot of money. This is all pointing to the root cause of all this volatility and downturn in US equity markets and it is uncertainty.
Ok, so we know money is leaving the US but where is it all going?
Some of it has gone into Europe, where European markets are uncharacteristically outperforming the US, specifically European defence stocks.
Some of the capital has also gone into Asian markets with some decent growth stories such as the Deepseek moment, where strong AI capabilities were shown on budget language models in China, as well as the simple fact that Chinese tech stocks are MUCH MUCH cheaper than their US counterparts so the upside is far more considerable.
But, and this is a big but, a lot of capital is going into gold and the forces that are driving it up are likely to stick around for several years.
So, let’s get into it shall we! Here are three reasons why I’m bullish on gold! (For the love of God please don’t give off Trump’s Greenland video vibes arghhh)
As discussed in the beginning of this article, there are quite a few logs in the uncertainty fire. If you’re betting on continued economic, geopolitical, and/or trade uncertainty for the next 4 years (at least), the best way to express this view is through gold.
Investors around the world are in “risk-off” mode, meaning they are reducing their portfolio exposure to stocks and shares and piling into safe haven assets such as gold. This is what is primarily driving the price of gold up. As of writing this (1st April 2025), the gold price sits at a record high of $3,148.88 and I suspect over the long term it will be higher.
I suspect it will be higher because Trump’s “Liberation day” is on April 2nd, (which is not yet up there with our Halloweens and our Christmases but we’ll see) where he plans to unveil his tariff plans and who are most affected. We’ve already seen Canada retaliate on trade and I don’t think the buck stops there. Regardless, global growth will likely be adversely impacted affecting the performance of stocks around the world hence the demand for gold.
So, when we talk about the word of the day, it’s important we reflect on our portfolios to see where we are most exposed in terms of volatility and diversify from the previously well performing US market.
If you’re someone who prefers to look at graphs (I’m not judging) here you are:
Source: “Investors flock to gold funds as fears over Trump tariffs mount” FT (2025)
Have you ever wondered why the US can borrow trillions of dollars every year with seemingly very little repercussions? When the UK tried increasing borrowing, the Prime Minister resigned sooner than a lettuce could go out of date and the press had a field day running titles such as “Liz Truss tanks UK economy”.
Increasingly, investors have been wondering about the very question I just posed.
To in part answer the question, they are able to run a 123 per cent debt to GDP ratio because their currency is the reserve currency of the world. But, what happens when this is threatened? What happens if people no longer buy US Treasuries? We just assume people will buy US government bonds and we just assume that the US will never default the same way we assume the sun will rise in the morning and the moon will appear in the night.
Well, I can tell you what happens.
Investors buy gold instead of US bonds.
This leads me to the de-dollarisation story.
You may have seen in the news that the Bank of England is struggling with significant increases in demand for gold by other central banks around the world causing delays in gold shipping.
Why the sudden demand?
1. Unsustainable US fiscal spending
Not only are central banks buying more gold, but they are buying less and less government bonds for the reasons we touched on earlier. US bonds are often seen as another way of holding the dollar so if you think the US of A is going to unsustainably spend their way to the ground, devalueing the dollar in the process, then gold is a sure fire way to preserve the value of your money. Trump has already expressed his views for a weaker dollar in the hope that this will make America more competitive when it comes to exports and thus reducing the trade deficit. Now, if you believe in making America great again and you think this means the onshoring of jobs, the return of manufacturing and production in the US, in order to sell those goods, the dollar must weaken.
To hit this point home, sure central banks have increased their purchases of gold recently, but this has been a slow and steady trend for several years now well before the election.
2. Weaponisation of the dollar
Having dollar assets leaves you particularly vulnerable to the US. Countries with significant assets in the dollar are exposed to sanctions, political control, and trade wars. So, if you’re unsure of where you stand in Trump’s good books and potentially worried about being economically coerced to do certain things through dollar sanctions (just like what the US did to Russia), buying gold almost makes you impervious to which side of the bed Trump wakes up on. So, by having gold in your central bank reserve, you preserve the capital you need to pay for things despite dollar sanctions.
Throw the textbook out the window!
I have to say , thank you for making it this far, but now we have come to arguably the most important point. Textbooks and general advice surrounding gold is the following: safe haven, flight to safety, hedge against inflation, blah, blah, blah.
All of this is still true but recent evidence suggests that there are other, longer term forces driving the price of gold up.
Now, here’s a compulsory graph to prove I know what I’m talking about:
Gold price and US dollar correlation – 10 year
Blue line – dollar | Orange line – gold price (Terribly sorry if you’re colour blind)
There are two events I would like my readers to pay attention to: post 2010 and 2023/24.
The 2010 dollar and gold price correlation is as textbook as it gets. Big financial crash, stocks go kaput and gold price surges. Still with me? Ok, great.
Now, on the graph, look at the past 2 years. We’ve had a COLLOSSAL artificial intelligence bull run in the stock market (think Nvidia, Microsoft, TSMC, etc.) but look at the gold price. It’s risen with the stock.
Gone are the days where investors purchased gold as an OMG the world is ending asset but it has consolidated itself, in my mind, as one of the best long-term performing assets. Don’t get me wrong, conventional wisdom around gold as a safe haven asset and as a preserver of wealth is still true but my point is once equity markets recover and confidence improves, gold might just go up with it.
Whilst this section (rather ironically) has looked and sounded like a textbook, my message is this: slam that textbook closed and throw it out the window!
I think it’s high time we reframed the way we look at gold and this is a good start.
So, where does this leave me?
Ok, deep breath everyone. If you’re feeling a little bloated like you’ve eaten too much for dinner or sunk about 10 pints of Guinness, I totally get it.
Let’s talk about practical next steps.
Let’s say I’ve made a good case for gold and you want to do some basic risk management by trimming some fat on the stocks and putting it into the precious metal but have no idea what to buy or where to start.
Of course, the team at Bullion House are incredibly happy to speak with you but I also have a piece coming soon discussing various fun and exciting investment grade coins.
Written by Brandon,
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