Kiran Kowshik, Global FX Strategyist, and Dr Luca Bindelli, Lombard Odier Investment Strategy Directorabout the current market.
From 2022 to 2024, an upward narrative for gold focused on geopolitical tensions and investors looking for alternatives to the US dollar. during these three years, the central banks bought around 1,000 tons of gold per year, which meant a double increase in the purchasing rate compared to the previous decade.
In the first three months of 2025, this trend continued, although it was interrupted by the importers of goods that advanced shipments to avoid US tariffs. Uu. Which began to be applied in April. This explains why gold was only one of several basic products – including copper and silver – that had a good performance until April 2.
The US dollar is still weak and will remain the next months
However, from the Trump administration tariff ads on April 2, concerns about a possible recession in the US and the investors’ career for diversifying their portfolios have further promoted gold prices. These factors have been amplified by investors seeking to reduce their exposure to the US dollar, within the framework of a broader debate about their stability as a world reserve currency and the reliability of US assets.
The gold rebound reached its maximum point with an increase of 17% in a period of two weeks, establishing a USD 3,500 record per ounce on April 22. To the existing uncertainty about commercial and geopolitical policies, concerns about the public attacks of President Trump were added to the independence of the Federal Reserve.
Gold will probably consolidate within a range
Since then, gold has retreated and the US dollar has stabilized against the main currencies. If the US economy avoids the recession, as we hope, and the Trump administration moderates its rhetoric on tariffs and interest rates, gold should stabilize in a price range between 3,000 USD/ounce and 3,300 USD/ounce in the short term.
According to some indicators, the feeling of investors has reached extremely bullish levels, not very different from those observed at the beginning of the pandemic in 2020, when a global recession threatened and central banks used quantitative flexibility tools. The demand for retail investors in their portfolios, visible through investments in ETFs (funds quoted in the stock market), has increased considerably. The rhythm of the flows to the largest gold ETFs in the US. And Europe, measured in periods of 4 weeks, has reached levels not seen from the shock of the covid.
Similarly, metal inventories such as gold, silver and copper in the New York merchandise bag (Comex) increased in the first quarter of the year in the expectation of US tariffs and, since then, they have decreased. The demand for imports during the first three months of the year also supported gold, which helps explain the recent consolidation in prices.
Long -term diversification gains are maintained
Despite its volatility, Gold has historically had a good performance during fallen pronounced in the S&P 500. As a recent study shows, gold has won in 11 of the main falls of the stock market since the mid -80s. However, gold is not the only financial asset that offers a certain relief against the fall of the actions. Both the Swiss Franco and Japanese Yen also had a strong performance during the falls of the shares market.
To evaluate the performance of shelter assets, we analyze the performance of gold, the Swiss Franco and the Japanese Yen in the year after the start of a correction of the S&P 500 of at least 10%. We divide the correction episodes into those accompanied by an economic recession and those who were not. Our sample covers the period since 1973, since before that date, the exchange rates were not floating and the value of gold was strongly managed as part of the Bretton Woods monetary agreement.
Historically, initial profits in shelter assets have not endured in the medium term
In general, during the economic recession phases, gold initially offers high yields, but its profits are fading in a few months after the start of the correction of the S&P 500. For example, on average, the Japanese Yen and the Swiss Franco won around 5% or 6% in the three months following the start of the fall of the shares market. A “successes” shows the percentage of events in which an asset had a positive performance during the falls of the sharing market. For the comparison, we include the current sales episode that began on February 19 of this year.
This most recent episode suggests a very similar behavior by traditional shelters, although the profits of the Swiss Franco have been higher than the average, while both gold and Japanese have been inferior. The euro and the sterling pound have also won this year, which suggests that, unlike previous episodes, the weakness of the US dollar has been more generalized, which has aggravated losses for international investors not protected in US shares.
Our expectation remains that the US will avoid a recession. We maintain a neutral position on gold and a positive perspective about the Swiss Franco and Japanese Yen, who play a valuable role of diversification against actions in case of new volatility in stock markets. Both the Swiss and Japanese Franco have strengthened or even beyond their fair values against the US dollar.
We also hope that the Swiss National Bank will reduce its interest rates to zero, and we cannot exclude the risk of negative rates or interventions in the currency market to support Swiss exports. This is especially likely if the US applies punitive tariffs to pharmaceutical products. The recent strength of the Japanese Yen suggests that the Bank of Japan will maintain its interest rate in suspense this year. Therefore, our 12 -month perspective for shelter assets depends on the developments in the commercial agreements between the US and their main partners, as well as the general feeling of risk in the markets.
Gold has poor performance after the first two months of a correction in the sharing market
In the case of falling market drops without recession, our results suggest more limited profits both in size and duration for these shelters. Gold has poor performance after the first two months of a correction in the sharing market. The Swiss Franco has a slightly better performance, but then also experiences a similar decrease. On the other hand, the Japanese Yen has a better performance and maintains its value for up to six months after the start of a fall in US actions.
In these circumstances, the cost of covering must be taken into account, since the Swiss Franco and the Japanese and low -performance currencies, which implies a cost of Carry to maintain short positions in US dollars, provided that interest rates in the US are higher, as is the case currently, than in Switzerland or Japan. Therefore, any diversification benefit must be carefully balanced with the cost of maintaining such positions.
To do?
We hope that gold experiences a consolidation period between 3,000 and 3,300 USD/OZ in the coming months. From a tactical perspective, and given its high volatility, the weakest prices phases can create opportunities to accumulate this precious metal. From a strategic perspective, we continue to maintain gold in our strategic assignments of assets, given its low correlation with the actions of the United States. And its good performance in periods of falls of these actions, although it remains a volatile refuge that requires a careful analysis of feeling and flows.
Other alternative shelters can offer better performance if a drop in actions is not followed by a recession. This is especially true for the Swiss Franco and, even more, for the Japanese Yen, which also stands out in recession environments. However, given the strong rebound of all shelter assets, a correction is likely if trade negotiations reduce tariffs and international markets calm down on the independence of the Federal Reserve against possible interference of the Trump administration.
