Here’s What Geo-Politics Are Signaling About $5000 Gold

As gold breaks its all-time record, here are the factors that will drive it further.

Gold has blasted to a new all-time record of $2,942. That puts us just shy of the $3,000 we forecast in September.

There are plenty of reasons that gold prices remained resilient through 2024 and have been surging since the start of 2025.

They range from central banks buying gold in order to diversify against the U.S. dollar and protectionist U.S. policies to the continued rise of BRICS and non-G7 governments seeking to non-fiat assets for similar purchases. Gold is also serving as an inflation hedge, an option for wealth preservation and a safe haven asset for global investors in times of uncertainty.

As we embark upon this next phase of tariff and supply chain battles, China's actions and public broadcasts will be the primary catalysts for the physical price of gold.

Currently, China is broadcasting a big ‘GO’ for gold on all fronts. By following Chinese positioning, you can understand where gold is headed and where macro trends might be headed, too.

When the PBOC Acts, People Follow

According to the World Gold Council, China’s central bank, the People’s Bank of China (PBOC) purchased 10t of gold in December. That was its second consecutive monthly purchase – at least officially.

Unofficially, it’s hard to tell. As I learned from on-the-ground research in China for my book Collusion, the PBOC plays by its own rules. The Chinese central bank only releases information it wants to disclose when it’s most convenient.

Either way, the additional gold purchased pushed China’s official gold holdings to 2,280t. That means the PBOC now holds 5.5% of its total foreign exchange reserves in gold. That’s 44t higher than it was at the end of 2024.

Notably, the 10t gold purchase in December was twice the 5t gold purchase in November 2024. That matters because both increases occurred in the wake of the U.S. election.

World Gold Council

Now, there is a high correlation between the Chinese central bank buying gold and its citizens buying gold. We saw this at the end of last year.

That’s why Chinese gold ETF holdings hit a record total of $9.7 billion on the back for strong buying in December. That addition reflected a record 115t worth of gold in Chinese currency, the RMB.

If the PBOC keeps buying gold, so will the Chinese population.

World Gold Council

The surge in China’s year-end gold buying was also due to a variety of ‘the usual’ factors. These include the depreciation of the RMB relative to the dollar, lower government bond yields that make gold more attractive than interest-bearing assets – and ultimately greater expectations of more rate cuts, which would exacerbate both of those factors.

My analysis shows another reason the PBOC relaunched its "official" gold purchasing binge in the wake of the U.S. election. The PBOC leadership is working to enforce the point that gold is better than U.S. Treasury debt and views it as an important tool to counter continued tariff battles.

Tariff uncertainties make it crucial for China and other governments to diversify away from the U.S. dollar and U.S. policy.

That means more gold buying and less U.S. Treasury debt buying. For investors, this could signal that long-end U.S. yields will continue to rise along with gold prices.

Gold is the Ultimate Tariff Hedge

In 2018, when the Trump 1.0 administration slapped tariffs on a list of its allies and adversaries, China accelerated its policy of reducing its reserves of U.S. Treasury bonds and increasing its gold percentage of reserves.

Since then, China has further reduced its exposure to the U.S. It did this by growing and extending bilateral trade agreements with trading partners and penning agreements where trade could settle in non-U.S. dollar terms.

Back then, the percentage of gold in the PBOCs reserves was relatively small. It hadn’t announced any buying increase since the 2015-2016 period. Gold prices ended 2018 at $1280.

Meanwhile, the PBOC's holdings of U.S. Treasuries have plummeted to $768 billion, or nearly half of what they were in 2018.

Fast-forward to today, that gold percentage has jumped to 5.5% (it was 3.7% just two years ago).

Meanwhile, the amount of U.S. Treasuries the PBOC holds has plummeted to $768 billion, or nearly half of what it was in 2018.

All of those numbers point to one thing: gold is going up.

The question is, how much will gold rise?

Putting the Math Together

So, let’s break this down with some back-of-the-napkin math.

Let’s say that over the next two years, China continues its same pace of gold buying as the past two. That would mean its percentage of gold holdings will increase to about 8%.

That would imply an increase of about 100t of gold.

Two years ago, gold prices ended 2022 at $1800. That’s $1000 less than where we are now.

Now, we’re not saying that only Chinese buying moved the price of gold by that much. But China is not alone in its gold accumulation.

Plus, our forecast shows that the Fed will cut rates by more than they are currently projecting by the end of the year. And even if that is off the mark, it will almost certainly need to within two years, which will provide gold tailwinds, too.

So, all things considered, if the math and other factors hold, we are on a path for gold prices to be at least $2000 per ounce more in two years than they are today.

For those looking to follow this trend over the long-term, one way to invest in gold is with a pure gold ETF such as the abrdn Physical Gold Shares ETF (SGOL). The other is to buy gold coins from an accredited place like the U.S. Mint or from our friends at Asset Strategies International.

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