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By: Gustian Farrow, Head of StoneX TV • Content Channels
Rhona O’Connell, StoneX Head of Market Analysis for EMEA and Asia, joined Fiona Cincotta to explore the driving forces behind gold’s surge, including central bank activity, the dislocation between London and COMEX delivery, and why refiners in Switzerland are working around the clock.
Geopolitical tensions and trade policy shifts are contributing to record highs in the gold market. O’Connell notes that investors are increasingly looking to gold as a hedge against both inflation and broader economic risks. She adds that central banks have continued to purchase substantial amounts of gold.
O’Connell continues, adding that central banks have been net buyers of gold for years, taking a significant amount of the yellow metal off the market. Beyond the physical impact of these purchases, she believes that their activity can be interpreted to be a strong cautionary message regarding fiscal and currency risks worldwide. This institutional appetite can act as an anchor for gold prices, offering additional support whenever market volatility rises.
One often-overlooked factor, according to O’Connell, is the logistical challenge of re-refining London 'good delivery' bars — which are typically larger — into bars that meet COMEX specifications. With refiners working nonstop to meet demand, the supply chain can become stretched, and this dislocation not only drives up costs but also accentuates market uncertainty, as participants rush to secure the right form of gold in the right location.
Tariff measures have the potential to spike inflation by increasing the cost of imported goods, but they could also dampen overall economic growth, adds O’Connell. While the long-term effects remain uncertain, this scenario of rising costs and weaker growth, also known as stagflation, historically lends support to gold prices as investors seek safe-haven assets.
O’Connell believes that the question of whether gold will reach or exceed $3,500 hinges on a mix of geopolitical tensions, central bank policies, and shifting economic conditions. She notes that while nobody in the precious metals community can predict the future with complete confidence, while the current interplay of heightened uncertainty and logistical hurdles makes gold a focal point for investors seeking stability. If uncertainty persists, she suspects gold prices will continue their upward climb.
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--- Written by Gus Farrow
--- Expert: Rhona O'Connell, StoneX Head of Market Analysis EMEA & Asia
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