Gold finished the month on an all-time-high in all major currencies, with tariff fears, a weaker US dollar and bond yields all contributing.
Chinese gold market activity appears to have stayed true to its seasonal pattern and suggests follow-through into February. German elections might put further pressure on the US dollar.
Gold finished January on an all-time-high of US$2,812, up 8% on the month, adding another positive start to its strong seasonal record . All-time-highs were logged across the board in major currencies (Table 1).
According to our Gold Return Attribution Model (GRAM), almost all drivers contributed positively including a large rise in the Geopolitical Risk index (GPR), with the only major drag coming from the lagged momentum effect of a strong US dollar in December (Chart 1).
Gold price and performance in key currencies*
| USD (oz) | EUR (oz) | JPY (g) | GBP (oz) | CAD (oz) | CHF (oz) | INR (10g) | RMB (g) | TRY (oz) | AUD (oz) | |
| January price* | 2,818 | 2,714 | 14,031 | 2,269 | 4,089 | 2,561 | 81,798 | 644 | 100,516 | 4,522 |
| January return* | 7.8% | 7.6% | 6.3% | 8.9% | 8.9% | 8.1% | 7.8% | 4.5% | 8.9% | 7.2% |
| Y-t-d return* | 7.8% | 7.6% | 6.3% | 8.9% | 8.9% | 8.1% | 7.8% | 4.5% | 8.9% | 7.2% |
Source: Bloomberg, World Gold Council
*Based on the LBMA Gold Price PM in USD, expressed in local currencies, except for the India and China where the MCX Gold Price PM and Shanghai Gold Benchmark PM are used, respectively.
Global gold ETFs secured a US$2.6bn (30t) gain in AUM, driven almost exclusively by strong inflows into European gold ETFs (+US$3.4bn, 39t) – likely aided by a European Central Bank (ECB) cut that took bund yields down quite dramatically over the course of the month. US funds lost US$500mn (6t), Asian funds pared US$320mn (4t) while other ETFs managed small inflows totalling US$51mn (1t).
COMEX managed money net longs added US$64bn (150t) to positions with a large increase in longs and a small cut in shorts.
It’s Yisi’s year of the snake in 2025, which occurs every 60 years and promises to be an auspicious one. Seasonal strength in local prices was evident in January with an average premium of US$6/oz recorded following several months of discounts (-US$9/oz on average, Chart 2).
In addition, intraday slicing of spot gold prices in January suggested activity during Asian hours (including the 11am AM price) were instrumental in performance last month. Given that February tends to positively correlate to January, a decent month may lie ahead.1 European gold ETF activity probably also contributed to the session’s strength (Table 2).
Intraday XAU spot price divided into three time zone sessions*
| Asia | Europe | US | |
| 22:00 to 11:15 | 11:00 to 14:30 | 14:30 to 22:20 | |
| Cumulative return | 4.95% | 1.02% | 0.82% |
| Volatility (ann.) | 11.24% | 19.73% | 15.08% |
Source: Bloomberg, World Gold Council
*Data from 1 January to 31 January. Time zones based on Greenwich Mean Time (GMT).
While focus is currently on the impact of President Trump’s first few weeks in office, with tariffs and bluster rocking markets, elections in Germany on 23 February could have far reaching implications too.
Surveys show that the issue German voters care more about than any other, is economic growth (Chart 3).
This means that whoever wins will have to deliver. And promises from all candidate parties have been emphatic about delivering on growth.2
Equity markets appear to have sniffed out the fruits of a change in administration, with the DAX outperforming most major indices over the past two months. But next to be impacted may be bund yields. Despite a softer ECB likely lowering short-end rates, stimulus could steepen the curve and pressure longer-term yields higher reducing the gap between bunds and US Treasuries. This spread tends to lead changes in the US dollar index (Chart 4).
So euro strength could add further pressure to an overvalued US dollar, although it might take a bit of time to materialise and will likely not be dramatic.3 With the Bank of Japan seeing domestic demand matching targets and further rate hikes tabled this year, we believe a slightly anti-consensus call on the dollar shifting down is a possibility.4
And gold’s relationship to the US dollar has been consistently negative over the last few decades, more so than bond yields. Although it’s not been key to gold’s price performance of late, we believe a softer trend should provide a gentle tailwind for gold (Chart 5).
Markets are currently fixated on the fallout of broad tariffs that the Trump administration has levied. And the knee-jerk reaction from currencies has been a strengthening of the US dollar (DXY). But elections in Germany might be a trigger for a sustained strengthening of the euro vs. the US dollar via a contracting Treasury/bund spread. Likewise, weakness in the Japanese yen appears less likely. All else being equal, US exceptionalism might find a challenge from these two corners, pressuring the US dollar lower – which given the consistent relationship with gold – can add further support to gold’s incumbent strength.
1Since 2003, the January prem/disc has explained about 70% of the variation in February with a significant (p<1%) and positive coefficient of 0.8 with no autocorrelation issues in the data.
2 “And despite the differences in political ideology, all parties are proposing broad economic reform packages as a part of their electoral campaigns”. FICC Tactical Strategy, 21 January 2025, Vanda Research
3FT | The ‘grossly overvalued’ American dollar | 16 January 2025.
4FT | Bank of Japan raises interest rates to highest level in 17 years | 25 January 2025.
