03.22. 2025 – CGTN Europe
JULIET MANN: This week on The Agenda: Going for Gold. We’ll examine what’s really driving the precious metals’ record new highs, and what it says about the state of the global economy.
JULIET MANN: Gold is perhaps the story of the market so far in 2025. The price has nearly tripled since 2018 and recently passed the $3,000/an ounce mark for the first time. Some say it could even top $4,000 by the end of the year. So what’s really driving that rise? And is it sustainable?
Here with me now are Michael Hudson, Distinguished Research Professor of Economics at the University of Missouri and President of the Institute for the Study of Long-Term Economic Trends; and Paolo Nogueira-Batista Jr., former member of the Executive Board at the International Monetary Fund.
Gentlemen, thank you both for coming on The Agenda. Michael, let me start with you. What is driving this extraordinary gold price rally?
MICHAEL HUDSON: The weakening of the United States’ ability to keep the price of gold down. Ever since the dollar went off gold in 1971, the United States somehow worried that this was going to lose its world financial domination. It turned out that wasn’t the case, that going off gold was the best thing that could have happened to strengthen the U.S. position because countries were investing in U.S. Treasury securities and financing the U.S. deficit.
And the world went off the gold standard onto a U.S. Treasury bill standard. But the United States always is worried that somehow there may be a threat to people and central banks holding their reserves in the form of U.S. Treasury. And the main rival that they’ve always worried about is the movement towards gold.
So for the last few decades, the Federal Reserve and the U.S. Treasury have been trying to hold down the price of gold to make sure that it wouldn’t appear as an alternative investment. And it’s been selling gold forward or it’s been leasing its gold, not only from Fort Knox, but apparently from the Federal Reserve, to gold dealers, and selling gold short on the Comex Exchange. And by selling gold short, that prevents any opportunity for the price of gold really going up.
Well, finally, as you pointed out, in the last few years, it’s leased so much gold that it’s reached the end of its ability to hold it down. And now, for the first time, we’re having a real market developing in gold. And all that’s gone hand in hand with the desire of a number of governments to say they want to de-dollarize. And from the idea of people that, well, maybe we need to diversify out of the dollar, now that the political and military situation[s] are changing. So all of that has led to increased speculation of gold.
And with the United States not being able to really provide more gold from the U.S. to London gold dealers, you’ve had gold being flown back to the United States. You’ve had the United States tell Germany: Well, you know, we know you want your gold back that you’ve asked for, your gold reserves that you’ve kept with the New York Federal Reserve, but we’re going to have to send it very slowly to you.
So all of this has led people to think that the United States is unable to keep down the price of gold. Therefore, it’s rising.
JULIET MANN: Yeah, well, a lot to unpack there. And I do want to get on to moves towards de-dollarization a little bit later on. But Paolo, let me bring you in here. Do you think this is a watershed moment for the gold market?
PAULO NOGUEIRA BATISTA JR: It looks like that because, as you know, gold is an alternative to other international assets, notably to the dollar. And when there’s a competition between gold and the dollar, safe havens come most in the form of gold holdings, or dollar holdings, T-bill holdings.
Now, the U.S. has been weakening its position financially and politically. It has resorted to the use of the dollar and the financial system to punish countries seen as hostile or uncooperative. So this has led many central banks to move towards gold. It’s the case of China, the case of Russia, the case of Iran, the case of India, I believe. This is a precautionary move towards gold because the U.S. dollar is no longer so reliable, given what they did, for example, with the reserves of Russia after the invasion of Ukraine.
And the euro assets are no longer reliable because the Europeans followed suit and applied the same sanctions to Russia. Russia was not the first case, as we know, many other countries.
Now, gold is an asset that can be trusted, provided it is warehoused in the country. Because if it is warehoused outside the country, it may be vulnerable to the same confiscations that Western countries have been applying. For example, Venezuela had its gold reserves frozen in the Bank of England, an act of piracy, I would say.
So gold can serve the purpose that used to be served by the dollar assets and the euro assets. The fact that gold is an alternative is also a reflection of the fact that the renminbi is not an alternative, not a full-fledged alternative, to the dollar, given the restrictions that China imposes on capital account exchange rate restrictions. This makes the use of the renminbi possible, but not as widespread as it could be, at least theoretically.
JULIET MANN: Well, Paolo, you talk about the renminbi. You’re saying it’s not an alternative, or is it just not an alternative yet? After all, there are lots of moves, aren’t there, for China to open up with all those structural and fiscal reforms?
PAULO NOGUEIRA BATISTA JR: You’re right. It is an alternative, and it is becoming increasingly an alternative. But this alternative has limitations imposed, I believe, consciously by the Chinese themselves. China wants to test the temperature of the waters, doesn’t want to go into full convertibility and widespread use of the renminbi before it’s sure that the stability of the Chinese economy is not threatened by these moves.
JULIET MANN: Michael, let’s bring you back in, because I’ve been thinking about things like tariffs and trade disputes. To what extent do you think those are pushing investors towards those traditional safe havens, like gold, to protect their wealth during these uncertain economic times? Or does that shift by central banks add momentum to the gold rush?
MICHAEL HUDSON: Well, certainly, private investment has a lot to do with it. And there’s talk by the Trump administration of even imposing tariffs on gold imports. In other words, he’s putting tariffs on everything, and he’s talked about putting tariffs on gold. And his objective is to reduce the American demand for gold. And that’s going to be part of the American strategy of holding gold prices down so that private investors are not going to look at it as an opportunity to make a capital gain in the gold price.
But this is more or less a desperate move. And what’s affecting the gold market today that wasn’t before was people would buy and sell gold on the Comex Exchange, but none of that gold that was being bought and sold actually was settled by a physical transfer of gold. What was bought and sold on the Comex Exchange was [what] the price of gold would be. But this wasn’t gold for actually using. This was gold just for setting the price to offer a vehicle for gambling.
But now, the demand for gold has spread beyond simply betting on the price, to actually taking physical possession. And that’s what’s destabilized the market, because the U.S. Federal Reserve and Fort Knox have leased so much gold to gold dealers, mainly in London, that the question is, well, can all these dealers deliver? The dealers thought, well, the worst that can happen is that the Fed is going to say, well, we’re going to increase the leasing charge that we give to you, and you’ll just have to pay more leasing, and you can pass it on to your gold customers.
But now, there are senators and representatives that want to actually go back to Fort Knox. And they haven’t said it, but meaning the Federal Reserve to say: Is there any gold there? How much has been leased? Nobody has a clue as to how much. And so, all of a sudden, there’s this added risk factor of, well, where is the gold physically? And a desire to shift gold or to take actual possession of the gold.
One of the problems of private speculation in gold is, where are you going to keep the gold? You don’t want to keep it at home because you can be robbed. Do you keep it in Singapore? Do you keep it in a gold fund? Well, how do you know that the gold fund has all of the gold? And even the gold dealers may have sold more gold than they actually have in hand, just like happened in the 16th and 17th century. So the risk factor of an opportunity to hold gold has increased, and so you’d better take physical possession of the gold. And that’s been bidding up the price.
JULIET MANN: So you’re talking about private speculators there. I’m quite interested to zone back in on what central banks are doing, Paolo. You mentioned that spending spree, notably from countries like China, like Russia, like India. And 1,037 tons were added to reserves in 2023 alone. What signals is that giving?
PAULO NOGUEIRA BATISTA JR: Well, that’s giving a signal of insecurity with respect to the traditional safe assets. “Safe,” because they are no longer seen as safe by China, by Russia, by India. So they’re moving out of treasuries, U.S. Treasuries, out of bonds issued in euros, currencies that have become problematic, that have been geopolitically used by their issuers, to something they can see as more safe, again, provided it is warehoused at home.
So I don’t think that central banks are necessarily being very transparent about how much gold they have been buying. But everyone assumes, I believe correctly, that it’s a large, large amount. So the figures you see about the decline of the dollar in the share of reserves of countries are probably understated because many movements that the Chinese and other central banks do go unreported to these sources of international financial statistics.
JULIET MANN: Now, Michael, China is an enthusiastic buyer of gold, as we’ve been discussing. What do you think the implications, then, are for global gold demand and pricing?
MICHAEL HUDSON: Well, President Trump has said he wants to increase America’s balance of trade by reducing the value of the dollar. Reducing the value of the dollar is going to increase the price of gold, which is increasingly made [by the outside world]. So if the dollar is going down, if the U.S. economy is beginning to impose sanctions on more and more countries financially in order to convince them to follow the policies that the United States wants them to follow, then countries are going to want to make themselves immune from financial sanctions by not leaving their money in the eurozone or the United States, where it could be confiscated, as Russia’s $300 billion was. They want to take physical possession.
Because any kind of investment in foreign currency is investment in some kind of debt. But gold is a pure asset. If you hold gold, there’s no debt associated with it. If you hold dollars or euros, or other foreign currency, every security you have is somebody’s debt, and you’re trying to avoid the problem of debt when you have a fluctuating economy going very rapidly up and down, as you’re having today.
And when President Trump says–he’s talking now about converting foreign exchange reserves, the foreign central banks, into 100-year permanent dollar holdings, this means they can’t just trade them back and forth to stabilize their exchange rates. That is a debt that will not have to be repaid for a hundred years.
It’s as if the United States sees that the game is over, and it’s just trying to lock in as much foreign investment in dollars as it can, because there’s a growing awareness that the United States has so much foreign debt to foreign central banks and foreign commercial banks that this debt cannot be paid. And if the debt can’t be paid… You don’t want debt, you want a pure asset. And gold is the asset that civilization has decided on agreeing on for the last few thousand years.
JULIET MANN: Paolo, emerging market banks have also been diversing away from dollar-denominated reserves. They’ve been moving towards gold, in particular. What does this structural shift suggest, would you say?
PAULO NOGUEIRA BATISTA JR: Again, the behavior of emerging market central banks is motivated by the same factors that lead other central banks to move towards gold, and away from dollar and euro assets. It’s a lack of security. But let me tell you, insofar as I know, for example, the central bank of Brazil is a laggard in this respect. It is still concentrated fully on U.S. Treasuries.
Now, what can the United States do? The best way forward, which I doubt that the government will take, the Trump government will take, would be to recognize that the failures of the dollar, the insecurity associated to the dollar, derive from the behavior of the United States themselves, and commit not to use the dollar as a mechanism of sanctions. That might reverse, at least partly, the lack of trust in the U.S. dollar. There have been some statements, still very minor, from the U.S. administration in that direction.
Now, if they go into the direction that Professor Hudson has just mentioned, convert, forcible conversion of bonds into long-term debt, 100-year bonds, this would be a final disaster. It would confirm all the fears that other countries have with respect to the U.S., that are not only political or geopolitical, but also financial. Because if you look at the U.S. economy, it’s in a mess. It has been in a mess for years: large fiscal deficits which cannot reduce an increase uninterrupted in the public debt of the United States.
So, the United States is the chief enemy of the U.S. dollar, I would say, and also the chief friend of the gold market.
JULIET MANN: Michael, I wonder if you would agree with that, that this is the last financial disaster. I mean, how would you characterize this move away from the dollar and towards gold?
MICHAEL HUDSON: Well, sanctions and threats are the only thing that the United States has left. It no longer can offer other countries a win-win situation, and Trump has said that America has to be the net gainer in any international deal it’s made, whether it’s a financial deal or a trade deal. And if America is saying, any deal we make, you lose, I win, that is not a way to attract people into making deals with you.
And Trump’s way of negotiating: when you don’t have very much to offer economically, all you can do is offer not to hurt other countries, not to sanction them, not to do something that will be against their interest. And other countries want to get away from that strategy of American diplomacy.
JULIET MANN: Paolo, in terms of the gold rush, so far, what have we been talking about? There’s a lot of positive sentiment towards it. But what about the downside? Are we, are investors getting away with ourselves? Is it overvalued? Is a correction coming soon?
PAULO NOGUEIRA BATISTA JR: That’s the chief weakness of the gold asset as a reserve asset: it has a lot of instability in its prices. So you can gain or lose unpredictably from the fluctuations in the market. That’s why central banks would not move towards the gold en masse, meaning that they won’t have a predominant share of the international reserves, I believe, in gold. They would tend to diversify also away from gold, not to be overly dependent on the price of gold. So the downside to gold is, it’s unpredictable.
So you asked, you just asked, the gold price has increased a lot, enormously. Is that too much? Will it reverse movement? If you buy when the price is high, won’t you be exposing yourself to losses? So central banks like the one in Brazil have been laggards. If they now start buying gold on a large scale, they might be hurt by reversal of the price in the future.
JULIET MANN: Michael, what do you think? Do you think the price of gold is overvalued and what’s your outlook? Where’s it going?
MICHAEL HUDSON: Well, just because the price of gold has recently gone up does not mean that there’s been a sudden demand for gold. There’s been an increasing demand for gold for the last ten years. But this vast increase in the demand for gold was not accompanied by a corresponding increase in the actual price. You had a stabilization of gold prices for a while between $1,200 and $1,400/an ounce, then between $1,600 and $1,800/an ounce. And that remained absolutely stable, despite the increase in demand, because of the United States meeting this demand with its own gold stock being leased out, or with its own market operations selling gold short in advance to keep prices down.
So the demand is simply continuing to go up, as it has all along. But the ability of the U.S. Treasury to resist that demand from raising the price of gold is no longer operative. So I don’t see much risk of the price going down.
I think we’re now just seeing the price of gold actually reflecting the increase in demand. You mentioned India, and India has always been known as the sink of gold, so you’re going to have India there. You’re going to have China buying gold, as they’re talking about having some standard of value for currencies that it’s denominating intergovernmental debts among the BRICS countries. Gold is going to be built into the restructuring of the world economy that we’re seeing. And that structural change, I think, is not going to be reversed. Therefore, I don’t see the price of gold having much risk of a downside.
JULIET MANN: And Paulo, looking at markets like China, like India, where we see those seasonal spikes in consumer purchasing, of gold in particular, what clues about the future of gold, the gold market, gold prices, might we get there?
PAULO NOGUEIRA BATISTA JR: I’m not sure how to read these signals that you mentioned, but private sector buyers are following the trend that perhaps is set by the central banks themselves. And I see in the horizon no alternative to the gold as an international standard. I already mentioned that the Chinese currency, for Chinese reasons, is not there to fill in the gap.
It’s difficult, I agree with Professor Hudson, to see the United States reestablishing, through their own actions, confidence in the dollar. Europeans won’t do that either. So I think we see a situation that will lastingly indicate that private sector buyers and official buyers will have an interest in hoarding gold as a precautionary asset for very uncertain times. They were uncertain already, as we all know. But with the behavior of the Trump administration, highly destabilizing behavior, the new U.S. government, this uncertainty has increased. And this, of course, benefits the demand for gold.
MICHAEL HUDSON: I don’t think any currency is going to fill the gap. That’s the problem, because other countries are not running enough of a balance of payments deficit to pump their currency into the world economy. I think that whole idea of a country supplying its currency to the economy that other countries are going to have to hold in a kind of forced loan to these countries is being w[ound] down. The whole idea of international reserves is moving away from debt, more towards an asset-based currency. So I think we’re in agreement for that.
JULIET MANN: But Michael, we’ve talked a little bit about the U.S. economy. We’ve touched on the European economy. In terms of the global economic outlook, what needs to change, that might reverse the trend we’re seeing in safe haven assets like gold?
MICHAEL HUDSON: For American policy to be different. It’s not going to change with Donald Trump there. He’s going to continue to try to do whatever he can on a transactional basis by saying: If you do something we don’t like, we’re going to hurt you. He’s been threatening trade sanctions against countries that try to use other currencies. He’s talked about a BRICS currency, and there’s not going to be a BRICS currency. That’s his fantasy. But he’s talking about countries that move away from gold will face sanctions. Other countries are — that’s speeding the parting guest. That’s not really deterring them anymore.
JULIET MANN: How about you, Paolo? What do you think needs to change in our global economic system that might change gold’s rally?
PAULO NOGUEIRA BATISTA JR: As I said, the main competitor to gold is the U.S. dollar.
So a rise in the U.S. dollar, a recovery of the U.S. dollar, would depend on trust, and trust would depend on a change in policies, economic and geopolitical. I don’t see that coming with Donald Trump. On the contrary, I think that Donald Trump is deepening distrust in the U.S. dollar.
But again, why is gold so strong in this context? Because there are no other alternatives. The Western currencies besides the dollar are not an alternative. The renminbi could be in the longer run, but only if China feels secure, and it doesn’t feel secure yet, to become an issuer of a main international reserve currency. So you end up with countries, central banks, buying gold for lack of other alternatives, despite the downsides that gold has, and that we have spoken already about.
JULIET MANN: I want to ask you both your predictions for the price of gold. At least one expert has said we could be looking at $4,000/an ounce by the end of 2025. So, Michael, where do you see things going?
MICHAEL HUDSON: I don’t make forecasts of gold prices. Given the state of statistics and the complexities of the market, I don’t think you can. It’s not unrealistic to think that, yes, gold could go up to $4,000/an ounce, if the international political and military situation and economic situation polarizes and destabilizes.
JULIET MANN: And, Paolo, where do you think the gold price will be by the end of the year?
PAULO NOGUEIRA BATISTA JR: I share Professor Hudson’s reluctance to make forecasts.
You know, we economists are notoriously incapable of predicting the future. We even have difficulty predicting the past. So I wouldn’t dare to give you a number.
But I would say that uncertainty is on the rise, given all the factors we’ve mentioned, notably the behavior of the erratic new American president. And uncertainty on the rise means demand for gold. So I think there’s an upside to gold prices as we speak now.
JULIET MANN: Paolo Noguero-Batista Jr., Michael Hudson, thank you both very much.
Photo by Peter Thomas on Unsplash
