Thoughts on the Market: "Gold Rush Picks Up Speed" – Detailed Summary

Episode Release Date: April 15, 2025
Host: Amy Gower, Metals and Mining Commodity Strategist, Morgan Stanley

Introduction

In the April 15, 2025 episode of "Thoughts on the Market", hosted by Morgan Stanley's metals and mining commodity strategist, Amy Gower, the discussion centers around the significant rise in gold prices and explores the sustainability of this bullish trend.

Recent Trends in Gold Prices

Amy Gower opens the conversation by highlighting the unprecedented surge in gold prices:

"Gold breached $3,000 an ounce for the first time ever on the 17th of March this year and has continued to rise since then." (00:00)

She notes that gold experienced a 25% rally in 2024, primarily driven by strong central bank demand, the initiation of a U.S. Federal Reserve rate-cutting cycle, robust demand for bars and coins, and sustained geopolitical risks.

Continuing into 2025, gold has climbed an additional 22%, with rising tariff uncertainty adding momentum:

"This comes in two ways. First, demand for gold as a safe haven asset against this current macro uncertainty, and second, as an inflation hedge." (00:00)

Factors Driving the Gold Rally

Central Bank Demand and ETFs

A significant portion of gold's rise is attributed to central banks and the resurgence of Exchange-Traded Funds (ETFs) investing in gold:

"Central banks saw what looks like a structural shift in their gold purchases in 2022, which has continued now for three consecutive years." (00:00)

Additionally, after four years of outflows, ETFs have begun to redirect inflows into gold:

"ETF inflows are returning after four years of outflows, adding a significant amount year to date but still well below their 2020 highs, suggesting there's arguably much more room to go." (00:00)

Macro Economic Drivers

Macro factors play a crucial role in bolstering gold prices:

• Falling U.S. Dollar: A weaker dollar makes gold cheaper for holders of other currencies, typically acting as a tailwind for commodities.
• Stagflation Scenario: Environments where economic growth wanes while inflation risks rise are particularly favorable for gold.

Amy elaborates:

"A falling US dollar is usually a tailwind for commodities in general as it makes them cheaper for non dollar holders, while a stagflation scenario where growth expectations are skewed down and inflation risks are skewed up would also be a setup where gold would perform well." (00:00)

Safe Haven Demand

Amidst rising inflation and economic uncertainties, gold's role as a safe haven asset remains robust:

"Continued demand for gold as a safe haven asset amid rising inflation and growth risks is also likely to keep that bar and coin segment well supported." (00:00)

Outlook and Projections

Gower remains optimistic about the continued ascent of gold prices, projecting a rise to approximately $3,500 per ounce by the third quarter of 2025. She acknowledges potential short-term volatility but maintains that the overarching trend remains upward:

"We would expect this to continue with the price of gold to rise further to around $3,500 an ounce by the third quarter of this year." (00:00)

Risks to the Gold Rally

While the outlook is positive, Gower highlights potential bullish risks that could impede gold’s growth:

• Demand Destruction in Jewelry Segment: As gold prices climb, consumer demand for gold jewelry may wane due to budget constraints. The jewelry segment constitutes roughly twice the size of central bank purchases and is highly price-sensitive. She notes:

  "Annual jewelry demand is roughly twice the size of that central bank buying, and we already saw this fall around 11% year on year in 2020. So we would expect a bit of weakness here, but offset by the other factors that I mentioned." (00:00)

Despite these risks, Gower believes that the diminishing demand in the jewelry segment will be offset by sustained physical buying and macroeconomic factors.

Conclusion

Amy Gower concludes that the confluence of strong physical buying, favorable macroeconomic conditions, and ongoing global uncertainties will continue to drive safe haven demand for gold, maintaining its upward price trajectory.

"All in all, a combination of physical buying, macro factors and uncertainty should be driving safe haven demand for gold, keeping prices on a rising trajectory from here." (00:00)

Note: This summary excludes introductory remarks, advertisements, and disclaimers to focus solely on the substantive content of the episode.