Gold prices rallied to a fresh two-month high this week, supported by sharp fall in the US dollar and growing demand for safe-haven assets amid uncertainty around President Donald Trump's tariffs and policy agenda.
Spot gold has ticked 1.8% higher week-to-date to US$2,750 an ounce – the highest level since Trump's presidential victory on 6 November 2024 and within 2% of all-time highs.
A major driver this week has been the escalating threat of US tariffs, including a potential 10–20% universal tariff, a 25% tariff on Mexico and Canada, and a steep 60% tariff on China.
The Trump administration said they were considering rolling out the tariffs on Canada and Mexico as early as February 1, unless stronger measures are taken to curb the flow of unauthorized migrants and illicit drugs into the U.S. These comments were made public around 12:00 pm AEDT on Tuesday, which sent gold prices up 0.79% within the hour to US$2,725 an ounce.
With the new US president issuing a barrage of executive orders and stirring trade wars with some of the world's largest economies – its no wonder investors are seeking to park their capital in the yellow metal.
The World Gold Council (WGC) publishes monthly reports on gold ETF flows, which provide insights into the flow of funds into the gold sector. The WGC covers markets comprising about three-quarters of the world's annual gold consumption.
2024 has been a major turnaround for gold capital flows. Global gold ETFs experienced inflows in May, ending a twelve-month streak of outflows. This stepchange reflects factors including rising geopolitical risks, higher inflation expectations and strong demand from global central banks.
Global gold ETFs saw a turnaround in December, with flows flipping positive after a brief dip in November.
"In a year in which the gold price reached new all-time highs 40 times, global investor appetite for gold ETFs finally turned around, booking the first annual inflow in four years," the WGC wrote in its monthly report.
The key factors that contributed to the turnaround include:
Heightened uncertainties caused by the dramatic US election and flames of war on multiple fronts
Changing expectations of future rate paths as major central banks began their easing cycles
The strongest annual gold price performance since 2010
Gold prices have surged 42% in Australian dollar terms over the past 12 months, reaching A$4,385 an ounce, driven by a strong US dollar. UBS expects this rally to continue, citing "safe haven and diversification buying amid global geopolitical risks and resilient consumer demand."
In a note last week, the analysts reiterated their mid-year forecast of US$2,900 per ounce, equivalent to approximately A$4,500—or higher if the Australian dollar remains weak.
UBS also predicts that robust gold prices, strong corporate balance sheets, aging assets, and limited exploration success will fuel a wave of mergers and acquisitions. This trend is already underway, as seen on 2 December 2024, when Northern Star announced a $5 billion merger with smaller rival De Grey Mining.
The analyst maintained a Buy rating on Northern Star Resources, De Grey, Gold Road, Perseus Mining, and Bellevue Gold, with price upside ranging from 10% for Northern Star to 41% for De Grey. Meanwhile, Neutral ratings were assigned to Newmont, Evolution Mining, and Genesis Minerals.
Evolution Mining (ASX: EVN) released its December quarter report on Wednesday, delivering record mine cash flows and a solid operational performance.
Group cash flows for the quarter surged to $165 million, marking a 54% increase quarter-on-quarter and a 109% jump year-on-year. Management highlighted "potential improvement in the second half driven by high spot gold prices." This performance boosted cash reserves to $520 million, a significant rise from $191 million a year earlier.
Managing Director Lawrie Conway said the result reflected "the safe delivery of low cost production and the benefits derived from the high metal price environment," adding that "we are on track to meet our guidance for the year, which should provide a significant step up in cash flow compared to FY24."
While Evolution might be printing cash – so is the rest of the industry amid this rising gold price environment.
While Evolution's earnings have soared to record levels, the stock is also up around 85% in the last twelve months.
Despite this, Citi downgraded the stock from Buy to Neutral on Thursday, citing valuation concerns.
However, their target price was raised slightly higher from $5.50 to $5.80, reflecting positive sentiment towards gold and how the first-half FY25 update delivered on expectations. But if the gold price continues to climb – There will be more upside for gold miners to capture.
Get the latest news and insights direct to your inbox