Geopolitical tensions complicate the gold bull case, says AHG president

 Geopolitical tensions in the Middle East are complicating the outlook for gold, even as central bank buying continues to underpin demand, Max Baecker, president of American Hartford Gold, told Investing.com.

Baecker said geopolitical tensions have historically increased demand for gold as people seek stability. 

However, the Middle East conflict also presents an economic complication. Higher energy prices can fuel inflation and raise expectations for tighter monetary policy, which can strengthen the dollar and weigh on gold prices.

“These competing forces help explain why gold doesn’t always rise during a geopolitical crisis,” he said.

Baecker noted that central banks are making decisions based on long-term economic and geopolitical concerns, unlike short-term buyers reacting to Fed decisions or interest rate changes. 

He highlighted that central bank buying has roughly doubled from its pre-2022 average, as reserve managers move away from dollar dependence amid sanctions risk and fiscal concerns.

“Strategic buyers create the floor, and momentum buyers add the speed,” Baecker said.

He pointed to China as a key example. The People’s Bank of China has increased its gold reserves for 23 consecutive months, even as prices have fallen and rates remain elevated. 

The President of AHG added that Chinese net gold imports reportedly reached 316 tonnes in the first quarter, as buyers sought protection from currency weakness and property market stress.

“Asian buyers see gold as a store of value when confidence in other assets is under pressure,” Baecker said.

In the near term, he said the Fed sets the pace for gold, not its direction.