Bullion Bottlenecks and the Countdown to USD $3,000oz Gold?

Precious metal markets continued to see price strength this week, with gold hitting a new all-time high above USD $2,950 per troy ounce (oz), while silver is now trading above USD $33oz.

In Australian dollar terms, the two precious metals are also trading at or near the upper end of their historical range, with gold at AUD $4606oz, while silver is now above AUD $52oz, continuing the strong start to calendar year 2025.

The rally in gold, that has now seen the market climb by almost 50% in barely a year, looks like it may have further to run, with respected precious metal market commentator Ross Norman noting that; “The $3,000 level seems to be having a magnetic effect on the market and even though by most considerations the market is technically overbought, it seems determined to crack that magic level.”

JP Morgan also maintain their positive view on the market, noting that central banks are likely to remain firmly on the bid in the gold market this year, which is entirely understandable given current geopolitical realities, with the banks head of base and precious metal strategy Gregory Shearer suggesting that: “Central banks aren’t done with gold yet, with added political uncertainty likely helping to stoke a revival into 2025."

Shearer was also constructive on the outlook for demand from gold ETF investors (a segment of the market that has by and large not been adding to exposure in the last three years), as well demand out of China, at both a state and household level, commenting that; “With the PBoC buying again and the potential for China’s currency to be further devalued with the risk of tariffs, we think gold-owning appetite among Chinese consumers could receive a boost too as investors turn to gold as a real asset store of value.” World Gold Council data, which showed another 5 tonnes of gold being added to reserves held by the People’s Bank of China (PBOC), only adds further credence to the view shared by JP Morgan, with gold now accounting for 5.9% of total PBOC reserves.

Price strength aside, and the main story in the gold market (and quickly spreading to mainstream media) continues to be the exodus of gold out of the UK and into the United States, with the below chart, highlighting the spike in inventory that is held in Comex accredited New York warehouses.

This trend may continue for some time, especially while the Trump administration continues to dance its tariff pirouette, with fear over what they will do creating arbitrage opportunities for financial market participants to exploit.

Given the billions of dollars of gold being traded, these dynamics have created a near unprecedented backlog of work for vault operators, refineries and logistics companies that make up the precious metal supply chain, as this article highlights, with the LBMA doing a very useful 1 hour video on the dynamics of the London and New York gold markets. These market forces were also commented on in local news media this week, highlighting how ‘mainstream’ gold is again becoming.

While momentum is clearly with the bulls, it has to be noted that yearly returns of 40% or higher for gold are at the upper end of the spectrum, meaning its pace of growth is almost sure to slow-down.

The current plethora of ‘gold-friendly’ media articles could also be interpreted as an early warning sign that, in the short-term at least, gold might be becoming a bit too popular, and that a period of calm is needed to restore balance to the market.

Jordan Eliseo
General Manager, ABC Bullion Australia

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