Gold Surge Amidst Global Uncertainty

CGTN Europe spoke to Nitesh Shah, Head of Commodities and Macroeconomic Research at WisdomTree.

Transcript

00:00All right, joining us now for more on the gold rush is Nitesh Shah, Head of Commodities and

00:04Macroeconomic Research at Wisdom Tree. Hello, Nitesh. With all the global uncertainty brought

00:10on by these tariffs, one would expect gold to be in a straight up trajectory, but there have

00:16been some ups and downs. What do you put that down to? Yeah, in the initial days after Liberation

00:23Day, gold was under a little bit of selling pressure. That's because gold is like a liquid

00:29cash-like instrument. And when there was pressure on equity markets, when there were margin

00:36calls on futures positions, people were liquidating their gold to treat it almost like a cash-like

00:42instrument to meet their margin calls. That gave the initial pressure downwards, but very

00:46quickly it's turned around and we're at all-time highs on gold right now of 3,230 plus, and

00:53it's rising rapidly. I mean, it's astonishing. If you look back just a year ago, I think gold

00:58is $900 higher than it was last April, $1,400 higher than five years ago. So it just generally

01:06keeps on growing. Quite different from the slow growth, say, in silver, or actually the

01:10slide we've seen in platinum. Why does gold keep its glow?

01:17I mean, gold is quite a unique asset class. It's really a defensive asset, but also it has

01:23some cyclical properties to it as well. So when you see an economy overheating and producing

01:28inflation, gold prices rise. So gold has this kind of almost bipolar behavior. It does well in

01:36extreme good economic conditions and extreme bad economic conditions, and not many other assets do

01:42that. And some of the other precious metals have been doing well. Silver, until the end of March,

01:51was actually outperforming gold year to date. But gold has taken the lead with this increased

01:58uncertainty around tariffs. And gold tends to have the edge. When there's times of extreme

02:05uncertainty around the economy, around economic policies, around geopolitical policies, gold

02:12tends to be favored.

02:13Who's buying the gold right now? Which countries as well are buying the gold?

02:17Yeah, so a broad range of investors are buying gold right now. You can see OTC, over-the-counter

02:26volumes, looking quite healthy. Exchange-traded product investors, ETF investors, are also buying

02:34gold. Almost after sitting on the sidelines for the best part of two years, between 2022 and 2024,

02:432024, in the middle of both of those years, ETF investors were pretty much sitting on the sidelines.

02:50They started to come back in around the middle of last year, but over the last month or so, they've been

02:55really accelerating and joining in in the rally. In terms of other countries, China has been a very strong

03:03buyer of gold for a number of years. In contrast to, you know, the picture I painted for the global ETF

03:10market, you know, between 2022 and 2024. Chinese ETF buyers were pretty strong through that period and

03:19gaining that strength. And then you have all the central banks that are buying gold. And they tend to be more

03:27developing countries, central banks, led by Poland last year and China the year before. But the Chinese

03:36central bank, the PBOC, has been buying gold for five consecutive months and is gaining a lot of strength

03:43there. There is a lot of desire to diversify their currency reserves away from the dollar and other G7

03:54currencies. And gold is by far the superior option there. All right. Thank you so much, Nitesh. That,

04:01of course, is Nitesh Shah, head of commodities and macroeconomic research at Wisdom Tree.