Gold Surpasses Euro as the Second-Largest Reserve Currency in the World

The U.S. Dollar Index, when measured against a basket of other major currencies, has declined by approximately 10% this year through mid-June and is currently trading at its lowest level in three years. That’s no small dip, and there may be additional downside risk due to concerns over America’s growing deficit and the ongoing fluctuations in tariffs.

In a note to clients this week, UBS says the dollar is now “unattractive,” with further declines expected as the U.S. economy slows.

Meanwhile, Bloomberg reports that foreign vendors—from Latin America to Asia—are asking U.S. importers to settle invoices in euros, pesos and renminbi to avoid the currency swings.

This is a far cry from the post-World War II era, when the greenback was the unquestioned default for global transactions.

Gold Now the Second-Largest Reserve Currency, Following the Dollar

One of the surest beneficiaries of the dollar’s weakness has been gold. Priced in dollars, the precious metal has tended to move inversely with the dollar’s value.

That inverse relationship has been on full display this year, with gold trading above $3,400 per ounce, approximately $100 off its record high.

Even at these elevated prices, central banks around the world have continued to accumulate. According to the World Gold Council (WGC), official sector gold purchases exceeded 1,000 tonnes in each of the last three years, which is more than double the annual average of the previous decade. Institutions now hold nearly as much gold as they did back in 1965, during the Bretton Woods era.

A recent European Central Bank (ECB) report noted that, for the first time ever, gold now represents a larger share of total global foreign exchange reserves (20%) than the euro (16%).

This is remarkable, and it aligns with recent survey data from the WGC showing that 95% of central banks expect to increase their gold reserves over the next 12 months. That’s the highest figure since the WGC’s survey began.

The Global South Is Leading the Way

Much of the gold buying is occurring in the Global South. Countries like Turkey, India, China and Brazil have all increased their gold holdings in recent years.

Many of these nations are also exploring alternatives to the dollar-based financial system, which they increasingly see as a source of vulnerability rather than stability.

Consider Asia. Last week, CNBC reported how member countries in the Association of Southeast Asian Nations (ASEAN) are implementing a regional plan to reduce their dependence on the dollar by settling more trade in local currencies.

China is doubling down on its own payments network, the Cross-Border Interbank Payment System (CIPS), which offers a yuan-denominated alternative to SWIFT—the Society for Worldwide Interbank Financial Telecommunication, which facilitates international transactions between banks and institutions.

Just this month, China announced six new foreign banks as participants in the system, stretching its reach across Africa, the Middle East and Central Asia.

Sanctions Could Be Accelerating the Trend

Since Russia’s invasion of Ukraine in 2022, Western sanctions have highlighted the risks of holding too many dollar-based assets. According to the ECB, in five of the 10 largest annual increases in gold’s share of central bank reserves since 1999, the country in question had been sanctioned either that year or the one before.

For many emerging economies, gold serves as a form of geopolitical insurance. Treasury holdings and access to SWIFT can be frozen at any time. It’s more challenging to do the same with physical gold stored in a domestic vault.

What It Means for American Investors

To be clear, the dollar isn’t going anywhere anytime soon. It still dominates global trade and debt markets, accounting for around half of all transactions worldwide.

But its supremacy is gradually slipping, and the evidence is mounting.

That means American investors—especially those in or approaching retirement—should think carefully about how exposed their portfolios are to a single currency. Just as central banks are hedging their dollar exposure with gold and foreign assets, individuals and households may want to do the same.

As most of you know, I’ve long advocated the 10% Golden Rule. Consider allocating 10% of your portfolio to gold and gold-related investments—5% in physical bullion, and 5% in high-quality gold mining stocks.

To learn more about how to get access to gold and gold-related investments, email us at info@usfunds.com with the subject line GOLD.

Index Summary

• The major market indices finished mixed this week. The Dow Jones Industrial Average gained 0.2%. The S&P 500 Stock Index fell 0.15%, while the Nasdaq Composite climbed 0.21%. The Russell 2000 small capitalization index gained 0.42% this week.
• The Hang Seng Composite lost 1.70% this week; while Taiwan was down 0.12% and the KOSPI rose 4.40%.
• The 10-year Treasury bond yield down 2 basis points to 4.378%.

Airlines and Shipping

Strengths

• The best-performing airline stock for the week was Embraer, up 8.7%. UBS indicates that the latest capacity data shows United Airlines (UAL) is on track to grow domestic capacity by 7% year-over-year from June through August, well above the overall industry average of 1.4%. In terms of seats, Diio data shows UAL’s domestic seat count up 7.7% during the same period, compared to just 0.7% for the industry overall.
• The China Containerized Freight Index (CCFI) rates were up 5.8% week-over-week and down 12.3% year-over-year on North America routes to the West Coast. Rates to the East Coast were up 10.6% week-over-week and down 8.5% year-over-year, according to Morgan Stanley.
• According to BMO, near-term trends for Air Canada remain supportive of its 2025 financial targets. System-wide summer booking trends are encouraging. Pricing is generally stable and in line with management expectations, while load factors remain close to last year’s levels. U.S. transborder bookings, which were negatively impacted—dropping by mid-teen percentages—at the height of the Canada-U.S. trade conflict, have shown a gradual and partial recovery since late April.

Weaknesses

• The worst-performing airline stock for the week was Tongcheng Travel, down 16.1%. TSA throughput was down 2.0% year-over-year on a trailing 7-day basis, according to Bank of America. Off-peak days (Tuesday, Wednesday, Saturday) continued to underperform, with throughput down 4.2%, compared to just 0.6% on peak days.
• Container vessel operations remain 90% below normal (with total vessel transits just over 60% below), constraining nearly 7% of global container vessel capacity. This is due to ongoing geopolitical developments affecting the Bab el-Mandeb Strait, according to JP Morgan.
• Airports of Thailand reported that King Power Duty-Free has entered discussions to potentially terminate its three concession contracts across five international airports, citing policy changes and macroeconomic uncertainty as force majeure, according to UBS.

Opportunities

• In Morgan Stanley’s view, the launch of a new larger narrowbody aircraft could make Embraer a more globally relevant stock. Embraer could fill a gap in the narrowbody market at a time when Boeing and Airbus have backlogs filled through the end of the decade and in-service fleets continue to age because of the aircraft supply demand imbalance.

• Iranian oil accounts for 3% of global oil production and ocean tanker shipping volume. If Iranian supply is reduced, it would need to be partially substituted by the compliant market; in this scenario, Goldman Sachs estimates that 0.8% to 1.5% of global ocean tanker demand would shift from the shadow fleet to the compliant fleet.
• Airbus dominated the airshow with 250 orders, while Boeing did not announce any. The 250 total orders and memoranda of understanding (MoUs) announced by Airbus during the airshow are historically light, with the company averaging 380 orders at the event since 2015. Total industry orders year-to-date, including those from the airshow, stand at 1,093 aircraft—with Airbus and Boeing accounting for 541 and 552, respectively, according to Morgan Stanley.

Threats

• A leaked article revealed that JetBlue is unlikely to achieve break-even operating margins due to weaker travel demand, citing a staff memo obtained by CNBC.
• Companies covered by UBS with direct exposure to Asia export airfreight growth could face a slowdown. UBS believes that recent disruptions in trade and tariff policies will generally act as a headwind for UPS and FedEx (FDX).
• Iberia has set new medium-term targets for EBIT of €1.4 billion (up from €1 billion in 2024) and an EBIT margin of 13.5%–15% (compared to 13.6% in 2024). The previous margin target range was 12%–15%. No specific timeline has been attached to these goals, although the strategy has been labeled “Flight Plan 2030,” reports JP Morgan.

Luxury Goods and International Markets

Strengths

• German investor sentiment—reflecting Europe’s largest economy and home to many luxury conglomerates—jumped significantly in June, with the ZEW Sentiment Index reaching 47.5 points, up from 25.2 in May and well above the consensus of 35.0. ZEW President Wambach attributed the surge in confidence to recently announced government fiscal measures and ECB rate cuts, which could help end Germany’s prolonged economic stagnation.
• China’s retail sales rose 6.4% last month, marking the fastest growth rate since December 2023 and surpassing all expectations, according to official data released on Monday.
• Cettire, an online luxury marketplace based in Australia, was the top-performing stock in the S&P Global Luxury sector, rising 26.4% over the past five days. This rebound in shares followed a steep decline of nearly 50% last week, which was triggered by a weak trading update.

Weaknesses

• U.S. retail sales fell more than expected in May, with headline sales down 0.9% month-over-month, compared to expectations for a 0.7% decline. This marks the largest drop since January, when sales also fell 0.9%. April’s figure was revised down to a 0.1% decline from an initially reported 0.1% gain. Core retail sales, which exclude autos, also disappointed, falling 0.3% versus forecasts for a 0.2% increase. April’s core sales were essentially flat. These figures indicate weaker consumer spending heading into the summer.
• This week, European equities, measured by the STOXX 600 Index, underperformed U.S. equities, measured by the S&P 500 Index, amid speculation about the U.S.’s potential involvement in the Middle East conflict. The STOXX 600 Index fell 1.7%, while the S&P 500 declined 0.3%.
• Berkeley Group, a residential and commercial property developer in Great Britain, was the worst-performing stock in the S&P Global Luxury Index, falling 11.7%. Shares dropped after the company reported a decline in pre-tax profit and forecasted further decreases next year, citing economic uncertainty and high interest rates. Investor concerns were also heightened by leadership changes, contributing to the negative market reaction.

Opportunities         

• Analysts are now revising their projections for Germany’s economic performance, forecasting a return to growth in 2025 after two years of contraction. This marks a significant shift from earlier expectations, which had anticipated a 0.3% decline in economic output for that year. The revision is driven by improved global economic conditions, stabilization in key sectors such as manufacturing and exports, and easing inflationary pressures.
• Luca de Meo has been appointed as the new CEO of Kering to address the company’s financial challenges and revitalize the struggling Gucci brand. Known for his leadership in both the automotive and fashion industries, de Meo is expected to introduce fresh strategies to rejuvenate Gucci and strengthen Kering’s overall portfolio. His focus will likely include refreshing Gucci’s creative direction, enhancing marketing, and boosting its appeal to both traditional and younger luxury consumers to restore growth.

• China reported stronger-than-expected retail sales this week. This robust increase highlights a continued recovery in consumer spending, driven by strong demand across various sectors, including electronics, automobiles, and food. Analysts had anticipated more modest growth, but the unexpected rise suggests that consumer confidence is steadily improving.

Threats

• The Eurozone and United States remain locked in tense negotiations over tariffs, with a July 9 deadline fast approaching. If no deal is reached by then, Brussels may retaliate with its own trade measures. The EU warns that failure to find common ground could escalate into a full-blown trade conflict.
• Ferrari has decided to postpone the launch of its second fully electric vehicle (EV) until at least 2028, according to a report by Reuters. The model was originally scheduled for release in 2026 but is being delayed due to weakening global demand for luxury EVs. Sources familiar with the matter told Reuters that the decision reflects growing concerns about market appetite and high development costs for premium EVs.
• According to a survey on long-haul travel published by the European Travel Commission (ETC) on June 10, 72% of Chinese respondents plan to travel to Europe this summer—up 10% from 2024. The figures reflect the highest demand from Chinese travelers since the pandemic. However, Chinese tourists do not plan to spend as much as they used to: only 29% of respondents say they plan to spend more than €200 per day, a 44% drop compared to last summer, while 54% plan to limit their daily budgets to between €100 and €200.

Energy and Natural Resources

Strengths

• The best-performing commodity for the week was natural gas, rising 8.77%. European natural gas prices fell 1.7% after President Trump signaled a potential pause in military action against Iran, easing fears of near-term disruption to Middle East energy flows. Traders remain focused on the risk of conflict affecting the Strait of Hormuz, a vital chokepoint for global LNG and oil shipments.

• The uranium spot price rallied 8% to $74 per pound, nearly erasing its year-to-date losses. The move was driven by Sprott announcing a $200 million “bought deal,” double the initially planned amount. The funds will be used to purchase physical uranium—the first such purchases since November, according to Morgan Stanley.
• Solar remains the cheapest and fastest-growing source of electricity for U.S. grids, even as artificial intelligence drives an unexpected surge in power demand, according to an analysis by Lazard Inc. Deploying utility-scale solar costs around $38 to $78 per megawatt-hour, compared to $107 for the most efficient natural gas plant, said George Bilicic, vice chair of investment banking and global head of power at Lazard. What’s more, these solar prices—already among the lowest—exclude any tax incentives.

Weaknesses

• The worst-performing commodity for the week was coffee, down 8.95%. Hedge funds cut their net bullish positions in robusta coffee to 2,210 contracts, the lowest in over two years—due to reduced long positions and increased short bets. While weather in East and West Africa remains favorable, seasonal dryness in central Brazil adds uncertainty to global supply.
• Stainless steel prices have fallen to a four-year low, driven by weak demand and high inventories. High-grade NPI dropped to 942.5 RMB/ton, its lowest since April last year, according to Fastmarkets. However, rising input costs—such as benchmark nickel ore prices and limited acid availability—may help stabilize prices.
• Global oil markets are expected to remain well supplied in 2025, barring major disruptions to Middle East crude flows, according to the International Energy Agency, suggesting a potential supply glut.

Opportunities

• Scotia recommends copper exposure due to low inventories and ongoing supply-side underperformance—most recently highlighted by Kamoa-Kakula. They forecast a multi-year, modest market deficit under a relatively modest demand scenario, transitioning to a large structural deficit by 2029–2030 due to a lack of new supply growth.
• Freeport-McMoRan Inc. rose after Scotiabank upgraded its rating on the miner to “sector outperform” from “sector perform.” Analyst Orest Wowkodaw sees copper benefiting from tight inventories and limited supply growth through 2030. “Given low inventories and a tight market, we see the potential for higher prices sooner than currently expected, particularly if trade war uncertainty fades and/or another supply-side shock occurs,” he said.
• Copper buyers are facing a major squeeze on the London Metal Exchange, with spot contract prices spiking as traders scramble for limited warehouse supply. On Tuesday, one-day contracts traded at a $36-per-ton premium to next-day contracts—the widest spread since a historic supply squeeze in 2021, according to Bloomberg.

Threats

• China’s oil demand will stop growing earlier than expected, reinforcing the outlook for a global peak and prolonged supply surplus this decade, the International Energy Agency said. The IEA slashed forecasts for Chinese consumption until 2030 by about 1 million barrels per day amid “extraordinary” domestic electric vehicle sales. It predicts the nation’s demand—which has driven global growth this century—will peak in 2027, with worldwide oil use topping out two years later.
• Senate Republicans released a bill that would end tax credits for wind and solar earlier than for other sources and make only modest changes to most other incentives, dashing hopes for relief from major cuts passed by the House. Shares of solar stocks were the worst-performing group in premarket trading after the bill’s proposed text was released, according to Bloomberg.
• Western nations will take years to develop enough rare earth processing capacity to limit China’s dominance over these critical materials, according to industry veteran and former Molycorp Inc. CEO Mark Smith. Beijing, which has been curbing some critical mineral exports since 2023, tightened controls on seven rare earths in April in response to aggressive tariffs from Washington.

Bitcoin and Digital Assets

Strengths

• Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Aerodrom Finance, rising 30.47%.
• An early investment in stablecoin issuer Circle Internet Financial has become one of the most profitable trades ever for Marshall Wace, netting roughly $700 million from the crypto firm’s stellar IPO. The fund participated in a $400 million funding round for Circle, the issuer of USDC, in 2022, according to a press release at the time, reports Bloomberg.
• Strategy purchased 10,100 Bitcoin for an aggregate price of $1.05 billion between June 9 and June 15. Its total Bitcoin holdings reached 592,100 as of June 15, with an aggregate purchase price of $41.84 billion at an average price of $70,666, Bloomberg writes.

Weaknesses

• Of the cryptocurrencies tracked by CoinMarketCap, the worst performer for the week was Story IP, down 23.79%.
• Bitcoin and other cryptocurrencies declined after Israel launched airstrikes on Iran. Bitcoin dropped as much as 3%, falling below $103,000, while smaller cryptocurrencies saw even steeper losses. The declines coincided with a sell-off in stocks and equity-index futures, as investors sought safety in havens like Treasuries, crude oil, and gold, according to Bloomberg.
• AQR Capital Management’s Cliff Asness supports Jim Chanos’s criticism of Michael Saylor’s claim that convertible debt provides downside protection for Strategy’s Bitcoin purchases. This disagreement is part of an ongoing Wall Street feud between Chanos and Saylor, with Chanos calling Saylor’s valuation model “financial gibberish” and recommending an arbitrage strategy to short Strategy’s shares and buy Bitcoin, Bloomberg reports.

Opportunities

• Ubyx Inc., a startup founded by Tony McLaughlin, a 20-year Citigroup veteran, has raised $10 million in seed funding to develop a clearing system for stablecoins. The system aims to connect stablecoin issuers with banks and fintechs, reducing friction for users making payments and addressing fragmentation and incompatibility between different issuers and blockchain networks, Bloomberg reports.
• The Bloomberg Galaxy DeFi Index, which tracks digital coins involved in decentralized finance, rose 12% this week. The index monitors prices of cryptocurrencies and related applications engaged in financial activities like automated market-making and lending, Bloomberg writes.

• The U.S. SEC announced four new hires for key positions, including a new director of trading and markets with connections to the crypto industry. Jamie Selway will lead the division responsible for regulating major securities market participants. He previously served as the global head of institutional markets at Blockchain.com and as chair of Skew’s board of directors, Bloomberg reports.

Threats

• Millions of people receive one-time login codes via text messages, but these codes often pass through intermediaries, making it possible for others to see their content. Security experts warn that using SMS for two-factor authentication is insecure and recommend alternatives such as biometric verification or dedicated authenticator apps to protect user accounts, according to Bloomberg.
• Bitcoin options indicate that traders are hedging against a price pullback to the $100,000 level amid rising geopolitical and economic uncertainty. The put-to-call volume ratio on Deribit surged to 2.17, reflecting strong demand for protective bets, especially in short-dated put options, Bloomberg reports.
• Norway’s government is considering a temporary ban on building data centers primarily engaged in power-intensive cryptocurrency mining, according to a study covering most of the country’s crypto mining power consumption, Bloomberg reports.

Defense and Cybersecurity

Strengths

• The U.S. semiconductor and AI ecosystem is rapidly consolidating and expanding, with Micron pledging $200 billion toward domestic DRAM and high-bandwidth memory fabs, and Marvell raising its 2028 AI chip market forecast from $43 billion to $55 billion. Meanwhile, Qualcomm is acquiring Alphawave to strengthen its data center capabilities, and SoftBank’s Masayoshi Son has proposed a $1 trillion AI and robotics hub in Arizona—dubbed “Crystal Land”—positioning the U.S. as the global nucleus for AI compute, fabrication, and next-generation infrastructure development.
• European defense-industrial partnerships are accelerating modernization and autonomy. Leonardo and Baykar have launched a 50/50 drone venture in Italy, Rheinmetall has teamed up with Anduril to deploy autonomous air systems, and Thales has secured new contracts under the A400M program. Meanwhile, the UK has approved Safran’s acquisition of Collins Aerospace’s flight control unit—with conditions—highlighting growing consolidation and technological cooperation across Europe’s fragmented defense ecosystem.
• The best performing stock in the XAR ETF this week was Rocket Lab Corp., rising 18.22%, after a surge in social media activity, analyst price target upgrades, and speculation about its involvement in Trump’s Golden Dome space defense initiative.

Weaknesses

• A record-breaking data breach has exposed 16 billion previously unseen credentials from platforms including Apple, Google, Facebook, GitHub, and Telegram—revealing passwords to VPNs, developer portals, and corporate accounts. This unprecedented leak, reportedly the largest in history, underscores critical gaps in cybersecurity practices and poses long-term risks to both private and public digital infrastructure.
• Palantir is facing renewed political scrutiny over its past federal contracts, as Democratic lawmakers demand transparency regarding allegations that its platforms may have supported the creation of an unlawful mass-surveillance database under the Trump administration. The company strongly denies the claims and accuses critics of spreading misinformation, but the controversy risks reigniting privacy concerns and regulatory backlash, especially as Palantir continues expanding into healthcare, defense and intelligence sectors.
• The worst performing stock in the XAR ETF this week was Astronics Corp., which declined 5.11%, after stalling near technical resistance levels, as fading momentum and profit-taking pressure outweighed recent bullish sentiment around commercial aerospace tailwinds.

Opportunities

• Vertiv Holdings, still trading below its highs, surged after announcing a strategic AI infrastructure partnership with Nvidia and receiving a bullish upgrade from Citi, which raised its price target to $130. With strong technical indicators and growing AI demand, Vertiv is positioning itself as a key player in next-generation data centers, attracting attention from top analysts and investors.

• India’s strategic defense and nuclear modernization—including expanded warhead stockpiles and enhanced delivery readiness—creates new opportunities for alignment with U.S. military and intelligence partnerships aimed at deterring China.
• Honda has successfully tested its first reusable rocket, marking a bold entry into the commercial space launch sector. Leveraging its expertise in robotics, mobility, and combustion systems, Honda aims to compete in the growing market for small satellite launches by 2029.

Threats

• China is rapidly expanding its nuclear arsenal, adding 100 new warheads over the past year and projecting a total of 600 by 2025—the fastest growth rate globally. With 350 new ICBM silos completed or nearing completion, SIPRI warns that the post–Cold War era of nuclear disarmament is effectively over.
• A new European Commission report warns that the EU is falling behind on key digital goals, particularly in AI and semiconductors. As artificial intelligence drives explosive growth in data and complexity, nations and businesses face mounting pressure to modernize their networks or risk losing competitiveness in the AI-driven global economy.
• Spanish Prime Minister Pedro Sánchez is threatening NATO unity by refusing to support a new 5% defense spending target, citing domestic scandals and economic concerns. His stance undermines Secretary General Mark Rutte’s efforts to demonstrate to former President Trump that Europe is serious about its own security.

Gold Market

This week gold futures closed at $3,383.40, down $69.40 per ounce, or 2.01%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 3.17%. The S&P/TSX Venture Index came in off 1.26%. The U.S. Trade-Weighted Dollar rose 0.54%.

Strengths

• The best-performing precious metal for the week was platinum, up 4.15%. Platinum reached its highest price level since 2014, driven by an 8.8% surge in imports into China in May to 12.6 tons—the highest since April 2023—highlighting strong demand as prices have climbed over 40% year-to-date. Traders report large spot market purchases contributing to market tightness, even as some anticipate profit-taking near $1,300 an ounce.
• According to data released by the People’s Bank of China, the central bank added 60,000 ounces to its gold reserves in May, marking its seventh consecutive month of net gold purchases, bringing the total to 73.83 million ounces. Gold now accounts for 7% of the country’s international reserve assets, a sharp increase from levels prior to the pandemic and Russia’s invasion of Ukraine.
• Avino Silver & Gold Mines has renewed its at-the-market (ATM) equity program, allowing the company to sell up to $40 million in shares directly into the U.S. market at prevailing prices. This flexible structure enables Avino to capture stronger share prices in real time, helping to fund growth initiatives more accretively and with less dilution than traditional equity raises.

Weaknesses

• The worst-performing precious metal for the week was gold, down 2.01%. Gold is set for a weekly decline as easing Middle East tensions and the Fed’s inflation warnings have dampened safe-haven demand and lowered expectations for rate cuts. Despite the pullback, gold remains up over 28% year-to-date and continues to trade just below its April record high of $3,500.10 an ounce.
• A Malian court has ruled that Barrick Mining Corp.’s Loulo-Gounkoto gold mining complex should be placed under provisional administration for six months, handing control of one of the Canadian company’s largest operations to state-appointed management, according to Bloomberg.
• Chris Brightman of Research Affiliates argues that gold is not the safe haven it is often claimed to be. “Gold is very volatile. If you think of it as a store of value, you are missing the boat. It is a speculative asset,” Brightman, Research Affiliates’ CEO and chief investment officer, told Barron’s. Ironically, Brightman overlooks key facts: the S&P 500 is more volatile than gold, and the U.S. 10-year bond is even more volatile than the domestic equity market. Yet he suggests investors should avoid gold, so where exactly does he propose they hide?

Opportunities

• According to Scotia, Dundee will acquire all outstanding shares of Adriatic at a purchase price of $3.62 per share, representing a 16.6% premium to Adriatic’s share price and a total equity value of $1.3 billion. The transaction consideration includes a cash component of $437 million and 0.1590 DPM shares for each Adriatic share held, resulting in the issuance of 54.9 million DPM shares. Dundee’s share price did not decline significantly following the deal, as investors recognized the expected value accretion.
• As reported by Bank of America, central banks have continued to increase their allocations and now hold just under 18% of outstanding U.S. public debt, up from 13% a decade ago. This trend should serve as a warning to U.S. policymakers. Ongoing concerns over trade tensions and U.S. fiscal deficits may drive more central banks to shift purchases from U.S. Treasuries to gold. The U.S. budget deficit, interest rates, and the strength of the dollar will be key drivers for gold in the second half of 2025—and could help push prices toward $4,000 per ounce.
• Since President Trump took office, the U.S. dollar has lost over 10% of its value against the euro, pound, and Swiss franc, and is down against every other major currency. This has clearly improved sentiment toward gold as a haven asset. Investors are concerned about the scale of proposed budget cuts, and with tariffs added to the mix, the result is a formula for economic slowdown. The economy risks stalling as policy decisions are delayed amid growing uncertainty, while the administration remains singularly focused on its social agenda.

Threats

• “In the last couple of years, gold has been the solution to whatever scares you,” said Jim Paulsen, a former market strategist for The Leuthold Group and Wells Fargo, who now writes on Substack. “It has been riding the wave of a persistent and growing pessimism bubble.” He added, “Expanding and intensifying fear is what drives the price of gold higher. However, once pessimism becomes extreme, the price of gold often nears a peak.”
• Gold is expected to fall back below $3,000 an ounce in the coming quarters as its record-setting run loses momentum, according to Citigroup Inc., which is calling time on one of the standout rallies in commodities. “Our work suggests that gold returns to about $2,500 to $2,700 an ounce by the second half of 2026,” analysts including Max Layton wrote in a report.
• Price gains for gold have been muted, even as Israel and Iran continue to exchange strikes. “At first sight, gold’s reaction may be surprising, considering the potential consequences of the conflict and also the typical skittishness of the more short-term-oriented traders in the market,” said Carsten Menke, head of next generation research at Julius Baer Group Ltd. “But a closer look suggests that it is in line with the historical pattern of such geopolitical shocks not lastingly lifting gold prices.”

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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (03/31/2025): 

Boeing

Airbus

Embraer

United Airlines

JetBlue Airways Corp.

Ferrari

Kering

Barrick Mining Corp.

Dundee Precious Metals

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.

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The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index.

The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500. The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500. The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500. The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500. The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500. The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500. The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.

The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The S&P Global Luxury Index is comprised of 80 of the largest publicly traded companies engaged in the production or distribution of luxury goods or the provision of luxury services that meet specific investibility requirements.

Bloomberg Galaxy DeFi Index: A benchmark designed to track the performance of the largest decentralized finance (DeFi) digital assets that trade in USD.

Bloomberg Galaxy Bitcoin Index: An index that measures the performance of Bitcoin, based on pricing sourced from multiple leading cryptocurrency exchanges.

Bloomberg Galaxy Ethereum Index: A benchmark that tracks the performance of Ethereum (ETH), using market data from major cryptocurrency exchanges.

The U.S. Dollar Index is an index of the value of the United States dollar relative to a basket of foreign currencies.

The China Containerized Freight Index (CCFI) is a weekly index that tracks the average container shipping rates from major Chinese ports to various global destinations. It reflects spot and contractual freight rates and serves as a key indicator of trends in global trade and shipping demand.

The German ZEW Sentiment Index is a monthly survey that measures the economic outlook of financial experts in Germany for the next six months.