Dollar’s Trouble Could Be Gold’s Triumph
March 06, 2025
Read Time 5 MIN
Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s portfolio benefits.
Dollar’s Trouble Could Be Gold’s Triumph
Gold’s Record Highs and Market Drivers
Gold continued its upward trajectory in February, reaching a record high of $2,951.73 per ounce on February 24, driven by safe-haven demand amid concerns over U.S. trade policy. The Trump administration’s policy induced uncertainty, combined with rising inflation expectations and diminished consumer confidence, weighed on major stock indexes, further boosting gold’s appeal as an alternative investment and portfolio diversifier.
A key factor behind gold’s latest rally was a surge in the holdings of gold bullion backed ETFs. Total known ETF holdings of gold increased by 2.49% in February, marking the largest monthly inflow since March 2022. However, profit-taking and a strengthening U.S. dollar in the final week of February triggered a pullback, pushing gold down by approximately $100 from its peak. Despite this decline, gold closed at $2,857.83 per ounce on February 28, securing a monthly gain of $59.42, or 2.12%.
Performance and Investor Sentiment
The NYSE Arca Gold Miners Index (GDMNTR)1gained 2.01% in February, performing significantly better than the broader equity markets, but ultimately falling short of matching the metal’s gains. However, year to date, gold equities have demonstrated relatively strong leverage to gold prices, rising 17.22% compared to bullion’s 8.89% gain.
This mixed performance was a key topic at the annual BMO Metals and Mining conference in Florida this past month. Optimism about the sector was met with frustration, as rising cash balances, improved liquidity, lower debt ratios, higher dividends and significant buyback programs have failed to spark investor interest in the past years. That trend may be set to change in 2025, as growing investment demand for gold, evidenced by inflows into the bullion ETFs, should also lead to increased demand for gold equities. Anecdotally, companies at the conference reported an increased number of meetings with general investors eager to increase their near-zero exposure to gold.
Resilience Amid Global Tariffs
The gold industry remains largely isolated from the negative impact of global tariffs. In fact, many gold producers could benefit from foreign currency depreciations triggered by these tariffs, as a significant portion of their cost base is denominated in local currencies. For example, Alamos Gold (approximately 7% of Strategy net assets), estimates that about 90-95% of its Canadian operational costs are Canadian dollar denominated, while about 40-45% of its Mexican mine expenses are denominated in pesos. While industry cost inflation is widely reported around the 3-5% range for 2025, the potential benefit of weaker local currencies and a rising gold price should more than offset inflationary pressures for the sector. This dynamic is expected to continue to drive margin expansion to new record levels.
The Evolving Role of the U.S. Dollar and Emerging Trends
For more than a century, the U.S. dollar has been the cornerstone of the global financial system. Most trade is financed in U.S. dollars, commodities are priced in U.S. dollars and the U.S. dollar has been used, coveted and hoarded by people and nations around the world. However, this is changing.
The U.S. dollar’s strength against other currencies has traditionally been supported by the robustness of the U.S. economy and its reputation as one of the safest jurisdictions in which to invest.
The chart below highlights a steady long-term upward trend of the U.S. Dollar Index (DXY)2 amid fluctuations in recent years.
U.S. Dollar Strength, 2008 to 2025
Source: FactSet. Data as of February 12, 2025. Past performance is no guarantee of future results. Index performance is not representative of strategy performance. It is not possible to invest in an index.
Recommended subscription
Despite its strength, the dollar has been devaluing relative to gold—an unprecedented trend that few view as a threat to the currency or sign of a precipitated crisis.
Historically, gold bull markets have been driven by three things:
- Runaway inflation – gold surged 1500% in the 1970s
- A failing dollar – gold climbed 302% from 2001 to 2008
- Financial crises – gold increased 134% from 2008 to 2011
The current gold bull market, which began in 2016, is remarkable because it is not accompanied by U.S. dollar weakness or a global financial crisis. While the pandemic was a crisis, its financial impact was short-lived, thanks to massive government intervention.
Erosion of Confidence in the Dollar
Another driver has emerged: people and nations that have long used, coveted and hoarded the U.S. dollar are now losing faith and trust in the currency as a store of wealth. This shift began in 2008 when the global financial crisis led many to question the efficacy of the banking system and western economic hegemony. It escalated with sanctions and freezing of assets imposed on Russia by the U.S. Other countries fear that similar retribution or “weaponization of the dollar” is possible for lesser infractions than the hostile invasion of another country. Now tariffs have been weaponized. Gold has gained 275% since Lehman Brothers failed in 2008 and 50% since Russia invaded Ukraine in 2022. Additionally, irresponsible fiscal policies and political chaos in the U.S. suggest that one or more of the traditional drivers of gold may reemerge. As a result, the world is slowly and methodically moving away from the dollar, a shift most evident in changes to currency reserves and increased central bank gold purchases.
China has been exiting U.S. Treasuries while increasing its gold:
China's US Treasury Holdings vs. Gold Reserves (2013-2014)
Source: Bloomberg. Data as of December 2024.
Central bank net purchases of gold began in earnest after the financial crisis and accelerated after the Ukraine invasion:
Central Banks Have Been Net Buyers for 15 Years…
Annual Central Bank Net Purchases, in Tonnes
Source: Metals Focus, LSEG Data & Analytics (formerly Refinitiv), ICE Benchmark Administration, and World Gold Council. Data as of December 2024.
We believe this marks the start of longer-term trends that will become recognized as a crisis of confidence in the U.S. dollar, potentially driving gold prices much higher than many expect. If a digital asset like Bitcoin, created and residing within servers, can be valued at $100,000, then surely an ounce of a tangible, reliable safe-haven asset like gold could reach a small fraction of that value.
To receive more Gold Investing insights, sign up in our subscription center.
Follow Us
Important Disclosures
All company, sector, and sub-industry weightings as of February 28, 2025, unless otherwise noted.
Bitcoin (BTC) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this communication.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results.
Please note that the information herein represents the opinion of the author, but not necessarily those of VanEck, and this opinion may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
Diversification does not assure a profit or protect against loss.
Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
Metals Focus is a leading, independent precious metals research consultancy. LSEG Data & Analytics, formerly Refinitiv, is an American-British global provider of financial market data and infrastructure. ICE Benchmark Administration provides financial exchange services; the company offers data, technology, and market infrastructure solutions for clearing, fixed, income, and benchmark administration services. World Gold Council is an international association for the gold industry.
1NYSE Arca Gold Miners Index (GDMNTR) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in the mining for gold. 2The U.S. Dollar Index (DXY) is an index of the value of the United States dollar relative to a basket of foreign currencies.
Any indices listed are unmanaged indices and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in a Fund. Certain indices may take into account withholding taxes. An index’s performance is not illustrative of a Fund’s performance. Indices are not securities in which investments can be made.
Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
NYSE Arca Gold Miners Index is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by Van Eck Associates Corporation (“VanEck”). VanEck products are not sponsored, endorsed, sold or promoted by ICE Data. ICE Data makes no representations or warranties regarding VanEck products or the ability of the NYSE Arca Gold Miners Index to track general stock market performance.
ICE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE ARCA GOLD MINERS INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
MVIS Global Junior Gold Miners Index (the “Index”) is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Associates Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. VanEck products are not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in VanEck products.
Gold investments are subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. Investments in gold may decline in value due to developments specific to the gold industry. Foreign gold security investments involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. Gold investments are subject to risks associated with investments in U.S. and non-U.S. issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, gold-mining industry, derivatives, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks.
Digital asset investments are subject to significant risk and may not be suitable for all investors. Digital asset prices are highly volatile, and the value of digital assets, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
© Van Eck Associates Corporation
Related Funds
Important Disclosures
All company, sector, and sub-industry weightings as of February 28, 2025, unless otherwise noted.
Bitcoin (BTC) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this communication.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results.
Please note that the information herein represents the opinion of the author, but not necessarily those of VanEck, and this opinion may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
Diversification does not assure a profit or protect against loss.
Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
Metals Focus is a leading, independent precious metals research consultancy. LSEG Data & Analytics, formerly Refinitiv, is an American-British global provider of financial market data and infrastructure. ICE Benchmark Administration provides financial exchange services; the company offers data, technology, and market infrastructure solutions for clearing, fixed, income, and benchmark administration services. World Gold Council is an international association for the gold industry.
1NYSE Arca Gold Miners Index (GDMNTR) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in the mining for gold. 2The U.S. Dollar Index (DXY) is an index of the value of the United States dollar relative to a basket of foreign currencies.
Any indices listed are unmanaged indices and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in a Fund. Certain indices may take into account withholding taxes. An index’s performance is not illustrative of a Fund’s performance. Indices are not securities in which investments can be made.
Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
NYSE Arca Gold Miners Index is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by Van Eck Associates Corporation (“VanEck”). VanEck products are not sponsored, endorsed, sold or promoted by ICE Data. ICE Data makes no representations or warranties regarding VanEck products or the ability of the NYSE Arca Gold Miners Index to track general stock market performance.
ICE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE ARCA GOLD MINERS INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
MVIS Global Junior Gold Miners Index (the “Index”) is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Associates Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. VanEck products are not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in VanEck products.
Gold investments are subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. Investments in gold may decline in value due to developments specific to the gold industry. Foreign gold security investments involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. Gold investments are subject to risks associated with investments in U.S. and non-U.S. issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, gold-mining industry, derivatives, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks.
Digital asset investments are subject to significant risk and may not be suitable for all investors. Digital asset prices are highly volatile, and the value of digital assets, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
© Van Eck Associates Corporation