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Weekly Market Update

Is the Gold Market Pricing-In US Recession Risks?

Gold market signals US recession risks as inflation, economic uncertainty and strong bullion demand drive prices. A 15% YTD rise in spot gold, ETF inflows, and EM central bank purchases support bullish sentiment for 2025 amid tightening equity market conditions.

5 min read
Head of North American Investment Strategy & Research
Head of Gold Strategy
Investment Strategy and Research

The S&P 500 in gold terms has plunged to its lowest levels since the 2020 pandemic. The mean ratio in March has dropped to around 1.9x versus 2.3x in December 2024 and a cyclical peak of 2.5x last February. During the peak Covid shock Mar–Sep 2020, the ratio hovered just above 1.7x. Weaker US economic data and heightened domestic and foreign policy uncertainty have prompted a strong bid for gold this year amid concerns about a US growth contraction, sticky inflation, and higher macro volatility premiums. These market concerns were echoed in the latest SEP coming out of the March FOMC.

Time will tell whether this recent move is a real warning sign for the US and the global economy or a temporary positioning blip. Even after a 27.2% nominal spot price return and 21.4% real price return in 2024, we are still constructive in 2025, especially since large-cap US equities had not had a correction event since 2023 and stayed in a bull market through 2024.

To be clear, the 15% YTD rally in spot bullion markets to record levels north of $3,000/oz has been led by both physical and financial drivers. The continued recovery in China retail gold demand post-pandemic and ongoing EM central bank purchases have been critical in structurally supporting higher bullion prices. But the most important bullish factor in 2025 has likely been the surge in gold ETF inflows, with western investors reversing a 3.5 year de-stocking cycle and increasing physical consumption via gold ETFs for the first time since 2020. The ETF delta from 2023 to 2025 is a sizable aggregate demand shock, representing an over 400 tonne swing thus far or 11–12% of primary mine supply forecast this year. And for the first time post-Covid, US investors are leading the bullion buying binge.

This evolving composition of gold demand towards US ETF buyers (amid what is likely to be a slight slowdown in EM CB and China retail demand from the 2024 trend) and suggests a new narrative for the bullish gold trade, that may be questioning US exceptionalism in 2025 with fresh demand for equity portfolio overlays, drawdown hedges, and policy/geopolitical hedges.

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