The three-year gold bull market isn't over

Business Times

2 days ago

AFTER hitting all-time highs of US$3,500 per ounce in April, gold has traded sideways not only in US dollar terms, but also across major currency pairs.
Despite this lack of progress for nearly four months, the leading precious metal has still delivered 29 per cent year-to-date returns – still outpacing the 11 per cent returns from global equities and the 7 per cent returns in global bonds by a wide margin.
Investors should not be concerned about this summer pause and instead view it as an opportunity. Recall, this pause in the three-year gold bull market is not its first. The first came after a 28 per cent rally in gold from its late-2022 low, as the US Federal Reserve entered the final days of its rate-hiking cycle while inflationary pressures began to recede.
Gold resumed its rally in late 2023; markets anticipated imminent rate cuts as recessionary fears loomed.
However, by Q2 2024, with economists' expectations of an economic downturn dashed, gold entered its second pause over disappointment that the Fed had not cut, and instead chose to remain on the sidelines. It was not until interest rate cut expectations rose again on recessionary fears and the central bank delivered an outsized 50 basis point (bps) rate cut in September did the next leg of gold's rally unfold.
The rally paused for a third time in late 2024 with the election of US President Donald Trump. A 'risk-on' tone had pervaded as impetus for the US economy was expected to shift in favour of fiscal policy with monetary policy potentially taking a back seat, much like in 2016 under Trump 1.0.
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However, renewed geopolitical strife and Trump tariff policies shortly after his January 2025 inauguration led investors to flee the dollar, restoring the bid on gold and pushing it to an all-time high in April 2025 again amid tariff-driven fears.
For investors, each one of these pauses was an opportunity to build positions along the path to gold's 110 per cent rise over the period. We believe the current 2025 pause is no different, especially in light of the recently reported weak employment figures in the US which has once again rekindled recessionary fears.
Potential for quicker rate cuts
As a result, prospects are growing that the Fed will resume its rate-cutting cycle. Patrice Gautry, Union Bancaire Privee (UBP) chief economist, currently expects 25 bps rate cuts in September and December. However, in light of the weak data to date in August, the potential exists that consensus expectations for 2026 cuts in Fed policy rates may be pulled forward into late-2025.
Such renewed US monetary policy support to the US economy, should it emerge, would coincide with now meaningfully accelerating US money growth which, at 4.5 per cent year on year in June, has only just reentered its pre-pandemic range, looking back to 1960.
This monetary and liquidity backdrop would once again be seen as a key secular trend that has been driving gold markets since at least 2022.
Recall, as the world emerged from the pandemic, global central banks stepped up their pace of bullion buying, increasing from average net purchases of 500 tonnes per year in the decade prior to the pandemic to nearly 1,000 tonnes annually from 2022 to 2024, according to the World Gold Council.
The first semester of 2025 has seen central banks within striking distance of a 1,000 tonnes per year rate. This is somewhat surprising given the nearly 30 per cent rise in gold prices from 2024 to 2025; it now costs central banks nearly an additional US$25 billion to secure the same 1,000 tonnes annually.
However, we believe that American fiscal profligacy – exhibited in Trump's 'Big Beautiful' budget passed in July; the ongoing 'weaponisation' of US dollar dominance with the unilateral American imposition of tariffs; and continued geopolitical unrest – continues to provide the underlying secular demand impetus for the multi-year bull market in gold.
This backdrop of secular demand, especially from emerging market central banks, combined with the prospect of a front-loaded rate-cutting cycle – potentially replicating the 100 bps in cuts seen from September to December 2024 – drove the pre-election rally in gold that year.
Thus, with cyclical tailwinds once again moving in its favour, the yellow metal is expected to continue its secular bull market moving into 2026. UBP global FX strategist, Peter Kinsella, expects gold to reach US$4,000 per ounce by early 2026 as the US rate-cutting cycle resumes.
Importantly for investors, we believe the leading precious metal should not only be viewed only as an investment return opportunity within portfolios.
We continue to believe that gold serves as the foundation of inflation-adjusted wealth preservation and risk management for investors. Gold is set to underpin portfolios amid the bouts of volatility, as it has throughout 2025 and critically, as the historical status quos across economic, social and geopolitical axes continue to seek new equilibria on an accelerated timeline in the months ahead.
The writer is group chief strategist at Union Bancaire Privee, a private bank and wealth management firm