Tailwinds for gold
As precious metal streaming plays, FNV and WPM responded positively to upward momentum in the gold price at the start of the year. The same can be said for Royal Gold (RGLD), which advanced 6%.
In the first month of 2025, the price of gold advanced approximately 7% and reached an all-time high just below $2,800 per ounce. As we have previously discussed, the streaming companies generally track movements in the gold price (and over long periods of time tend to outperform the return on gold).
Gold is off to a strong start with a number of favorable developments. Trump’s decision to move aggressively with tariffs creates geopolitical uncertainty, which favors gold as a safe haven.
Tariffs also have a tendency to result in easier monetary policy, which favors the gold price.
To absorb the negative impact of high tariffs on products imported into the United States, other nations may pursue monetary policies that lead to lower foreign exchanges rates, which would make their goods more price competitive.
As nations around the world effectively debase their currencies through money supply growth (or money printing), the price of gold, which is really a composite of all international fiat currencies, tends to rise. The recent upward movement in the gold price may in part reflect anticipation of this dynamic.
We have also seen reports of thinning gold inventories in London and concerns that Trump may extend tariffs to gold imports into the U.S. This is apparently prompting the relocation of gold bars to New York vaults and possibly creating supply shortages.
China is key
China remains an enormous player in the gold market.
The Bank of China has been consistently adding to its gold reserves (along with other emerging market central banks, including India) since the Biden administration essentially weaponized U.S. Treasuries after Russia invaded Ukraine by seizing Russian assets.
This has sparked a wholesale reconsideration of U.S. Treasuries as a reserve asset and inspired a new appreciation for gold as a non-sovereign reserve asset that is not vulnerable to financial sanctions.
In recent years, China has been selling Treasuries and buying gold primarily for this reason.
But with the Chinese economy now generating dismal growth—and exports further threatened by Trump tariff policies, gold purchases take on additional importance. They become a mechanism for China to devalue its own currency (by printing their own currency to buy gold) and stimulate its domestic economy.
Gold has also been a beneficiary of the Fed’s pivot towards rate cutting. Although the Fed has paused at the moment and appears to be taking a wait and see approach, the current downward trajectory in U.S. interest rates is favorable for gold investors.
Escalating trade wars with the U.S. could also trigger recessions in affected countries. This could lead to even more aggressive monetary policies and possibly the emergence of systemic financial risk, both of which are good for gold investors.
More progress for Visa
Last month, we highlighted the attributes of V as both an inflation protection play and a structural growth investment.
V shares performed well again this month, with the company delivering impressive quarterly results and guiding towards low-teens earnings growth for the full year.
We also note with great interest V’s announcement that it is partnering with Elon Musk’s X platform.
The “X Money Account” is expected to launch later this year and will utilize Visa Direct, its cross-border payments rail, to facilitate money transfers.
The partnership with X reinforces our confidence in V as a fintech innovator and its ability to leverage its vast payments network to prevail in the cryptocurrency arena as well.
Shares of BF.B declined as a result of weak spirits demand combined with investors pricing in tariff retaliation risk. The company is embarking on a cost cutting initiative and now has an undemanding valuation.
As an AI electrification theme play, copper miner FCX shares participated in the DeepSeek sell-off. We continue to have a long-term favorable view on the copper supply/demand dynamic.
While inflation is now moderating as a result of an extended period of tighter monetary policy, the brewing global trade war may lead to the adoption of easier monetary policies by central banks around the world. Inflation sensitive assets tend to benefit from this type of scenario.
