The delusion of the permanent

Who supposedly said "America has no permanent friends or enemies, only interests"? None other than the Nobel Peace Prize winner Henry Kissinger, although the origin of the quote is the 19th century British Prime Minister Lord Palmerston. He said we "have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow." Is that a cold-hearted or a realistic attitude? It's one the current White House seems to have adopted, with many unforeseen consequences - including a vigorous push for higher gold prices.

In the rush to condemn the US tariffs on many countries it has been forgotten that in October 2022 the Biden administration announced an export controls policy on artificial intelligence and semiconductor technologies to China, a form of protectionism that paradoxically may have helped strengthen China's domestic chip design industries.

The US has always adopted the Palmerstonian world-view; the latest variant is just rather more naked. A Palmerstonian attitude seems logical when it comes to owning gold - the ultimate in personal interests-protection.

Fresh records

Spot gold prices have been setting fresh records - in the last 12 months the Dollar price of an ounce has gone up by almost 35%, far in excess of the S&P 500, up by just 8.25% over the same period, against a long term average of 9.4%.

Investment bank analysts are hastily revising upwards their forecasts for the average price for gold this year; those at Goldman Sachs now think the end-2025 price could be $3,700/ounce, around 13% higher than today. In truth no-one can make an accurate forecast at the best (i.e least volatile) of times; these forecasts are no more than educated guesswork, an extrapolation from today's price. In the recent hyper-volatile context making price forecasts is a mug's game.

One projection however is more reliable. The recent market chaos isn't calming down soon.

Everyone from the mightiest central banker to the humblest Chinese worker anticipates an extension of inflationary pressures, the slowing down of local and international economies, pressure on jobs, the further erosion of fiat currency's purchasing power and - to top it all off - the slide into stagflation.

The US-China tariff war certainly isn't turning placid.

China Daily, the communist party's English-language mouthpiece, published a blistering riposte to the US tariffs this week. The "US has been living beyond its means for decades. It consumes more than it produces...Rather than being 'cheated', the US has been taking a free ride on the globalization train" it said. With an almost $37 trillion national debt, it's difficult to dispute the living-beyond-its-means argument.

The Fed frets

The US currently is paying about $3 billion a day in interest on its debts. Looked at another way that's 16% of total federal spending. Next year the interest payments are likely to be $1 trillion.

Hopes that America's central bank, the Federal Reserve, might give an extra boost to the gold price by cutting interest rates, as well reducing the money spent on this national debt, were dented this week. Its chief, Jerome Powell, voiced his frustration with the national administration, saying that its focus on trade is "likely to move us away from our goals" - which are maximizing employment while trying to achieve inflation of 2%/year. He anticipated higher inflation and slower growth.

The surging gold price shows one big thing - buyers with deep pockets want to hold gold. Not just central banks buying physical bullion. Many investors are opting for gold exchange-traded funds (ETFs), physical bullion and mining stocks.

The US Dollar's status as the international reserve currency is being increasingly questioned. China, as a member of the BRICS collection of countries, shares - perhaps leads - the drive to topple the Dollar. The Dollar's prized status is safe for now - of the more than $2 trillion physical banknotes in issue, around half are held by foreigners, according to the Fed.

But if the Dollar is still internationally esteemed, it's not clear that the federal administration feels that way. Accidentally or not, the Dollar has been falling against its main rivals. So far in 2025 its decline has been more than 8% against a basket of its biggest peers.

The previously unthinkable is now being openly talked about. The Dollar has no immediate fiat currency challengers, but under the current bellicose US administration almost anything seems possible. And that deep uncertainty is the most fertile ground for ever higher gold prices. In a world that seems more unsafe than for years, people yearn for safety. For many, that spells gold.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.