How gold shines!
17 NOV, 2025
Miguel Ángel Rico, CIO at Creand Asset Management in Spain
The historic surge in the price of gold shows that the market is desperately seeking safe-haven assets as collateral, taking the growing list of risks ever more seriously.
A combination of factors has provided strong support for gold, reinforcing its strategic appeal. Our base case is that gold will continue setting new highs in the coming quarters.
Gold’s recent trajectory has been increasingly shaped by the resumption of rate cuts by the Federal Reserve (including the end of QT or a potential start to QE), concerns over the institution’s independence, falling real interest rates and a US dollar that has been wobbling this year.
A common misconception is that gold serves only as a hedge against inflation and protection from currency devaluation. But it is far more than that: it is a hedge against the financial system itself. When held outside the financial system, gold is nobody’s liability and provides unquestionable collateral at times when public debt and credit (both on- and off-market) are seen, as they are now, as increasingly risky.
The search for safer collateral began in the aftermath of the war in Ukraine, driven initially by emerging-market central banks. The dollar could no longer be regarded as a reliable reserve asset in a world where the United States was willing to weaponise it. What began with central bank gold purchases has now spilled over into the broader market, which is also seeking safer guarantees in a financial system rife with mounting risks.
When central banks raise interest rates, assets such as bonds or deposits become more attractive, which can dampen demand for gold (as it generates no yield). But the opposite happens when rates are cut. Low rates typically favour gold. In addition, gold is priced in US dollars. If the dollar strengthens, gold usually becomes cheaper in other currencies and its price tends to fall—and vice versa. At the moment, the dollar has weakened year-to-date and everything points to a further decline ahead.
But let’s look for a deeper explanation: what might be motivating the market to find ways to protect itself against a loss of real wealth today, pushing the gold price to new highs? There are many possible reasons:
- A major credit crisis.
- The monetisation of ever-larger fiscal deficits worldwide.
- The bursting of the AI and equity-market bubbles.
- A recession.
- Tariff and geopolitical risks.
What all these scenarios have in common is that, in extreme cases, they could severely undermine the value of the collateral that functions as money within the market. Investing in gold begins to make sense when viable and safe alternatives start to run out.
In our view, overall market positioning in gold remains low. We expect the rally in gold to continue as its investor base broadens and it remains supported by the various factors outlined above.
