Gold is a remarkable metal. No one needs it, but everyone wants it. Even the most bitter enemies ultimately accept it as compensation in their disputes, and gold has always been attributed a certain value in all cultures and at all times. Although this fluctuated, sometimes quite violently, gold has never become completely worthless in the course of its history.
Incidentally, this also applies to silver in addition to gold, while many stocks and bonds are completely worthless today, and dilapidated properties are only worth the land on which they were built. Gold has also been a means of payment at times in its history. However, above all, it has always been a proven means of storing value.
This function of storing value has once again come to the forefront of investors’ minds since the end of the COVID era. Initially, high inflation frightened people, and many remembered that gold is an excellent hedge against inflation. In the meantime, inflation has fallen back somewhat, but the rise in gold continues unabated.
In the final instance, central banks only trust gold
The ongoing gold purchases by central banks are behind this development. They are not buying gold to protect themselves from inflation. They are acquiring the yellow metal because they know that, unlike the US dollar, euro, yen and Swiss franc, it is an investment that cannot fail. Gold has no claim character and cannot be increased at will.
Also, gold is not under the control of a single state or group of states. This is quite different with national currencies. They represent a payment claim against the respective central bank and can therefore fail, because states that can no longer service their debts and went bankrupt are much more common in history than states that have fully repaid their debts.
The fact that central banks are buying gold today and storing it in their vaults, but at the same time avoiding government bonds denominated in US dollars or euros, is a very clear vote of confidence in gold and at the same time considerable evidence of doubt and distrust of the bonds of other states, although these sometimes bring quite high interest rates.
The great awakening of investors to gold has begun
There is a high probability that, in retrospect, the year 2025 will be described as the year in which the world in general slowly began to turn its back on paper money. Such a process never takes place overnight. These are creeping processes. However, these can be significantly accelerated by various catalysts.
Donald Trump’s inauguration was such a catalyst, as the US President’s erratic negotiating tactics and approach initially startled investors and then slowly woke them up. Old, supposedly safe assumptions, such as that the US dollar is safe and that the US will pay its liabilities, have suddenly no longer applied since January 20, 2025. They have been replaced by pure uncertainty.
Nothing hates the stock market more than this uncertainty, and so it is not surprising that against this background the price of gold continued to rise sharply, while individual bonds had to accept price losses of up to 50%. Anyone who buys speculative stocks is used to losses of 50% and more. They are virtually part of the investment strategy and are offset by triple-digit profits.
The shock to bondholders will have massive consequences in the long run
But an investor who buys bonds does not want spectacular profits, but above all security and precisely calculable income. These investors are shaken to their foundations when the price of their investment is suddenly only worth half as much. This aspect cannot be given too much weight, because it is precisely at this neuralgic point that bondholders differ from shareholders.
The consequence of the uncertainty additionally reinforced by Donald Trump was a massive flight into gold. It has currently calmed down somewhat. But there is much to suggest that this calm is only the calm before the next storm. Not only in the USA, but in most countries, the debt problem is anything but solved. At the same time, there is currently no shortage of geopolitical conflicts.
The question is not whether investors will soon remember gold again, but only when the next surge will occur. It is clear that it will come. It is not for nothing that JP Morgan and Goldman Sachs have repeatedly raised their price forecasts for the yellow metal.
A long-term bull market lies ahead for the gold sector
Even gold prices of US$4,000 and more are currently not the wild dreams of doomsday prophets, but the sober calculations of Wall Street analysts who are simply mathematically correctly pursuing the question of what will happen if the flight into gold continues to determine investors’ thinking.
The gold market is far too tight to cope with a massive and sustained flight of investors into gold without further massive price increases. No more and no less than a fundamental paradigm shift is taking place. Therefore, you should not be surprised if in January 2029, when Donald Trump leaves the White House again, the general opinion prevails that the beginning of his presidency was a very good time to buy gold.
