By David Louis Verbruggen

 

"No one can predict the short-term direction of the gold price with certainty. What we can do, however, is analyse the factors influencing the market today and assess whether the long-term fundamentals have materially changed."

 

Over the past few weeks, we have repeatedly been asked the same question:

 

"How is it possible that the outlook for gold remains positive while the gold price is temporarily under pressure?"

 

It is a perfectly legitimate question.

 

When the headlines are dominated by geopolitical tensions, rising government debt and central banks continuing to purchase gold on a large scale, a temporary decline in the gold price may, at first glance, seem difficult to explain.

 

Financial markets, however, are rarely that straightforward.

 

In the short term, the price of gold is influenced by a combination of economic, monetary and technical factors. This does not mean that the fundamental arguments for holding physical gold as a long-term wealth preservation asset have materially changed.

 

 

The Influence of the U.S. Dollar

 

One of the most important short-term factors is the U.S. dollar.

 

Because gold is traded globally in U.S. dollars, a stronger dollar makes gold more expensive for buyers outside the United States. This can temporarily reduce international demand and place downward pressure on the gold price.

 

This is primarily a pricing effect and does not necessarily reflect a decline in confidence in gold itself.

 

 

The Role of Interest Rates

 

Interest rates also play an important role.

 

Gold does not generate interest or dividend income. When bonds offer higher yields, some investors temporarily allocate a larger share of their capital to fixed-income investments.

 

For gold, however, what matters most is the real interest rate: the interest rate after adjusting for inflation.

 

Historically, gold has often performed well when real interest rates are low, declining or remain negative for an extended period. Under such conditions, the opportunity cost of holding gold decreases.

 

 

Technical Market Movements

 

In addition to economic factors, technical market movements also play a role.

 

A significant share of daily trading takes place through futures contracts and other financial instruments, often referred to as paper gold. During periods of heightened market volatility, leveraged positions are sometimes reduced out of necessity.

 

Such selling can temporarily place additional pressure on the gold price without necessarily indicating weaker demand for physical gold or diminished confidence among long-term investors.

 

 

Long-Term Fundamentals

 

Those who look beyond day-to-day price fluctuations will recognise several structural developments that have been unfolding for quite some time.

 

Global government debt has reached historically high levels and continues to rise.

 

At the same time, since 2022, central banks' net purchases of gold have ranked among the highest ever recorded. In doing so, they are not only diversifying their reserves but also reducing their dependence on traditional reserve currencies while strengthening the resilience of their national reserves.

 

This is not a short-term decision, but a strategic one.

 

 

Confidence: The Foundation

 

Behind all of this lies perhaps the most important factor of all: confidence.

 

Throughout history, gold has played a unique role during periods when confidence in currencies, sovereign debt or the financial system came under pressure. For thousands of years, regardless of culture or era, gold has been regarded as a universal store of value. This unique position helps explain why gold continues to hold an important place both in the reserves of central banks and in the portfolios of many long-term investors.

 

Not because gold offers a guaranteed return, but because it is a tangible asset that is not the liability of any bank, corporation or government.

 

 

Geopolitics and Inflation

 

The geopolitical environment also remains uncertain.

 

Tensions surrounding strategic trade routes, such as the Strait of Hormuz, can lead to higher energy prices. Should oil prices remain elevated over a prolonged period, inflationary pressures could re-emerge.

 

Historically, such circumstances have often renewed investor interest in assets that help preserve purchasing power, including gold.

 

 

Government Bonds

 

The market for long-term government bonds has also come under pressure in recent months.

 

Higher long-term interest rates reflect investors demanding greater compensation for lending money to governments over extended periods. Where that capital ultimately flows cannot be predicted with certainty.

 

Historically, however, gold has often been among the assets that attract renewed attention during periods of increasing economic or geopolitical uncertainty.

 

 

Why Physical Gold Is Different

 

One characteristic of physical gold that is often overlooked is that it carries no counterparty risk.

 

A gold bar or a gold coin does not represent a claim on a bank, corporation or government. It is a tangible asset that exists independently of the financial health of any third party.

 

It is precisely this distinction that sets physical gold apart from many other financial assets and explains why it has been used for generations as part of a long-term wealth preservation strategy.

 

 

Our Perspective

 

Since 1956, we have guided our clients in the purchase and sale of physical gold.

 

Over the past seventy years, we have experienced numerous economic cycles: periods of high and low inflation, rising and falling interest rates, financial crises, geopolitical tensions and periods of exceptional economic growth.

 

Every period has presented its own challenges.

 

Yet we have consistently observed the same pattern.

 

Experienced long-term investors rarely attempt to identify the perfect day to buy or sell. Instead, they build their positions gradually and are guided not by short-term market sentiment but by a clear long-term vision.

 

For many of these investors, temporary corrections are not viewed solely as a risk, but also as an opportunity to reassess an existing position.

 

Some investors choose to take profits along the way. Those considering such a strategy should, in our view, focus not only on the profit realised in monetary terms but also on the quantity of gold that can ultimately be repurchased. Only when you are able to buy back more grams or ounces than you previously owned has your gold position truly been strengthened.

 

Our experience has taught us something else as well.

 

Those who purchase physical gold solely with tomorrow's price in mind often view the market very differently from those who regard gold as a long-term wealth preservation asset. It is precisely this difference in perspective that largely determines how temporary market corrections are perceived.

 

 

In Conclusion

 

Markets change.

 

Interest rates change.

 

Currencies fluctuate.

 

Economies evolve.

 

Yet one question remains unchanged over time:

 

How do you protect your wealth against long-term uncertainty?

 

For generations, physical gold has therefore formed part of a carefully constructed wealth strategy for many investors.

 

We do not believe that gold is the solution for every investor or every economic situation. We do believe that physical gold, as part of a well-diversified portfolio, can play a valuable role for many people.

 

Markets change. Our conviction that physical gold deserves a place within a carefully constructed long-term wealth strategy has remained unchanged for more than seventy years.

 

 

General Information

 

This publication is intended solely as general market information and does not constitute personal investment advice. Any investment decision should be made based on your individual circumstances, financial objectives and risk tolerance.

 

If you would like to learn more about the characteristics of physical gold and the role it may play within a carefully constructed long-term wealth strategy, we would be pleased to welcome you for a personal, confidential and no-obligation consultation.

 

Edelmetaal Richard

 

Téléphone : 03 886 62 54

 

David Louis 

0495 602 702

 

Egzon

0477 281 241