Another month, another set of new highs. Gold finished March 2025  at US$3,115/oz, a  gain of 9.9% m/m.Even a materially weaker US dollar, primarily via euro  strength, couldn’t prevent a stellar performance and new highs across all other major currencies .  

According to our Gold Return Attribution Model (GRAM), euro strength and thus  US dollar weakness was once again a key driver of gold’s performance,  alongside an increase in geopolitical risk capturing tariff fears. Gold  ETF buying continued apace in March with all regions contributing. US funds led  the charge with US$6bn (67t) of net inflows followed by Europe then Asia with  approximately US$1bn each. While ETF flows were positive, COMEX futures  declined marginally by US$400mn (5t) likely on profit taking.  

March review 

A stronger euro, tariff fears and  ETF buying edged gold to new  highs once again in March.  

Looking forward 

Fiscal and monetary support may  be receding, and the timing isn’t  great for risk assets given current turmoil. Fundamentals remain  solid for gold.

• Liquidity matters, and has arguably been bolstering both  financial assets and the economy in the US for much of  the post-COVID period 

• In 2022, however, US financial conditions tightened  forcefully as liquidity was removed from markets. This  perfect storm caused a very rare annual joint decline in  bonds and equities. Gold held up but also experienced  some bumps along the way 

• We are now at a similar impasse in liquidity conditions,  but with crucial differences that bode well fundamentally  for gold 

• The one hurdle is the hitherto strong run-up in gold  prices. Comparisons to the 2011 and 2020 peaks are likely  to be made, but in our view, the environment remains supportive of further gains. 

While by no means the sole contributors to their solid  performance, the US economy and financial markets  benefited from monetary and fiscal support since the COVID  pandemic.  

activity). Gold also succumbed, falling 20% over two quarters  

in 2022, before a recovery to end the year flat. Proving direct  causality is difficult, yet it does suggest markets and the  economy had grown accustomed to artificial support. 

At a crossroads 

While much of the conversation over the past week has  centred around tariffs, liquidity risk remains an important  undercurrent. And we believe we may now be approaching a  similar impasse to what markets experienced in 2022.  

Quantitative tightening is slowing but there has been no mention of a resumption of quantitative easing. Indeed, the  appetite might not be there given the high levels of debt and  sticky inflation. In addition, constraints on government  spending via the Department of Government Efficiency (DOGE) are stifling fiscal support. And the Fed’s Overnight  Reverse Repo facility (ON RRP) is low, which provides less  wiggle room for the Fed to manage liquidity issues. This  appears to be showing up in stats like order-book liquidity for equity futures and – as flagged in the Fed’s financial  stability report in November– on-the-run bond liquidity. It  may also be contributing to the year-to-date equity rout. 

And the labour market is flirting with contraction as hours  worked are in steep decline. Logically they lead an  employment slowdown as companies reduce hours for staff  before layoffs; statistically this also appears to be the case. But layoffs are also now on the rise and are likely to feed into  payroll numbers in due course (Chart 5). To add to this,  uncertainty surrounding tariffs has supercharged concerns  about the resiliency of labour markets in the short and  medium term. 

While inflation was rising more in 2022, it was driven by  growth. This time around inflation is sticky while growth is  faltering, resulting in a stagflationary environment. In this  context, rates are unlikely to be going up from here and  further weakening of the dollar is likely on waning US  exceptionalism 

Central banks have been strong contributors to gold’s  performance over the past three years and show few signs of letting up, adding fundamental support to prices 

US gold ETF investors had built up sizeable holdings in  2020 prior to the 2022 wobbles. But they have been  sidelined until recently, suggesting capacity to keep  adding. 

Fundamentals remain in place… 

The current run-up in price has taken many by surprise. Paraphrasing an old adage, shouldn’t high prices for a  commodity cure high prices? Gold is not a commodity in the  traditional sense and primary production’s response may have only limited impact on price. The willingness to hold  and reluctance to sell – given current extreme policy  uncertainty – could generate real momentum. By historical  standards, the current rally isn’t particularly large or long.  And comparing the current rally to the recent 2011 and 2020  peaks highlights that, relatively speaking, fundamentals look  more solid (Table 2):  

• US gold ETFs are a considerably smaller share of all US  ETF assets than during 2011 as ETF buyers have been on  the sidelines for the best part of four years they are not  overbought 

• Real yields are higher and above their long-run average,  suggesting more downside than upside risk for yields – and vice versa for gold prices 

• Forward equity price-to-earnings remains high, and that  provides capacity for further downside to equities should  an economic slowdown and earnings downgrades  worsen, especially in the current geoeconomic conditions,  a boon for gold’s safe-haven appeal 

• Credit spreads are considerably tighter than during the  two previous peaks. Again, widening risks trump  contraction risk, and are also gold supportive. 

• The dollar remains elevated relative to prior periods even  if it has weakened since the start of the year. With the  Trump administration favouring a weaker dollar and the  uncertain effect of tariffs, this could serve as an additional  tailwind for gold. 

…But not without risks 

But we also caution that there are risks for the gold price  after a rally such as this in such a short space of time. 

Treasury managers at central banks could prudently slow  their pace of buying given the price rally, as we saw with  some central banks last year. While consumer demand  adapts to higher prices eventually, the speed of price moves  is like to dampen net buying in the near term. A liquidity crunch could negatively affect gold as the most liquid assets  are sold to meet margin calls.

 Additionally, geopolitical and  policy nervousness is quite elevated, particularly given  significant uncertainty about tariffs and its effect on market  volatility, which is likely adding a meaningful premium to  gold prices. Any resolution could bring that premium out as  we have seen in previous historical periods.  

In sum… 

The extent and speed of gold’s rally has drawn out  comparisons to previous peaks. While there are headwinds  that the gold market will naturally face in this environment,  our analysis also suggest that current macroeconomic  conditions are quite different to prior periods when the gold  market reached previous highs.