Edmund Shing:
Hello and welcome to a new podcast from BNP Paribas Wealth Management. I'm Edmund Shing, Chief Investment Officer. In today's podcast I want to talk about gold and other precious metals. What is going on? And what do we expect following the current bout of volatility?
I think we should start with the backdrop. The backdrop is that gold and indeed other precious metals, such as silver and platinum, enjoyed an extraordinary performance in 2025. Gold up 65% in dollar terms over calendar 2025. Silver and platinum doing significantly better. Now if we look at the performance of precious metals in January, up until 28 January, they were continuing to perform very well. Gold, as an example, up to 28 January had been up 28% in less than a month since the end of December. So really quite extraordinary momentum carrying over from 2025 into this year.
Of course, following that, the last few days of January saw a sharp drop in precious metals. This has clearly carried on into February. So we are in a corrective phase where gold has fallen from an intraday peak of $5,600 an ounce to today something just over $4,800 an ounce. But even at this current level, gold is still up year-to-date since the end of 2025 by over 12%. So quite incredibly, despite the very sharp drop seen in precious metals, they are still registering, so far at least, positive performance for this year.
Now what caused the correction? Well, clearly, you had a lot of speculative investment in the build-up to this correction. So a lot of people, a lot of retail investors in Asia and in the developed world had been jumping on board the precious metals train, had been investing in precious metals on a speculative basis. Perhaps the trigger, however, in the short term was the appointment of Kevin Walsh as the next Federal Reserve president in the US. He seems as somewhat of an inflation hawk, someone who is likely to be a quite sensible Fed president and will not be cutting rates too dramatically. So perhaps a winding back of some of these expectations of huge Federal Reserve rate cuts this year.
But I think, honestly speaking, a lot of this is just the unwinding of speculative excess that had built up over the last few months. This corrective phase in precious metals can carry on for quite some time. This would be quite typical after such a heady run-up in the last few months, particularly in the last quarter of last year and, of course, for most of January as well. It would be perfectly natural for prices to take some time to stabilise. We still believe, ultimately, that the long-term trend for gold is still higher. Central bank buying, we think, will continue to be a strong support. We believe that gold continues to act as one of the few safe-haven assets that remain. And this is particularly important given ongoing geopolitical tensions. Of course, we've seen Iran. We've seen Greenland. We've seen Venezuela. Clearly, the Iranian tensions are not resolved yet. But no doubt there will be other geopolitical tensions that could flare up over the next few months. Not to mention, of course, the approaching midterm elections in the US in November, which could cause further geopolitical volatility, particularly coming out of the US. So all of that, I believe, still argues for gold as a safe-haven asset, as a diversifying asset in a broad portfolio for an investor.
I think if you look over the last 25 years, in fact, since the year 2000, it is still the case that gold has outperformed both global equities and indeed US equities, despite the fact, of course, that it carries no yield. So it has, not just in the shorter term, but over the very long term, also performed very well for investors. And we believe this is not the time to be selling gold. We would say rather hold your gold. And if it were to correct further, we would argue that that would be a good opportunity to accumulate more physical gold in your portfolio.
Our current target price in 12 months is $5,000 an ounce. But honestly, it could go somewhat higher than that in time. So we believe the long-term upward trend is still intact. Be prepared for a period of volatility and stagnation in the short term. That would be perfectly natural after such a large run-up and then drop. But we believe this does not change the long-term fundamental picture for gold, which we believe remains positive.
Thank you very much for listening to this podcast from BNP Paribas Wealth Management. Please do like, share and subscribe to our series of podcasts. And until the next time, for now, goodbye.