Demise of "Pax Americana" Drives Gold Price Bull Run: SP Angel

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Gold prices have pushed above $3,000/oz, in what amounts to a watershed moment for a rally that has its roots in massive geopolitical shifts.

Understanding the moving tectonic plates of the global order offers context to the rally in gold prices and hints that there is more to come.

"The fragmentation of the past 20 years of globalisation is likely a key theme in this gold bull run," says John Meyer, analyst at specialist brokers SP Angel in London.

"This theme has continued under Trump, with a potential end to ‘Pax Americana,’ and rising animosity between the U.S. and its long-held Western allegiances," he adds.

Pax Americana (Latin for "American Peace") refers to a period of relative global stability and order primarily enforced by the United States, similar to how Pax Romana described Rome's dominance in the ancient world.

Pax Americana has been in place since the end of the Second World War, which saw the U.S. surpass bankrupt Britain as the global superpower.

Trump Alienates Everyone

Meyer says the breakdown of Pax Americana is a feature of this decade. It was triggered by sanctions imposed upon Russia, prompting diversification away from dollar-denominated foreign reserve holdings.

"This has been reflected in a doubling of gold buying from Central Banks, led primarily by Western adversaries, notably China," he explains.

However, Trump has accelerated the breakdown by opening a fissure with America's post-war allies. JD Vance's speech at the Munich Security Conference was a watershed moment, where it was made clear the U.S. was no longer going to guarantee European security.

Trump's tariff wars and hawkish approach to U.S. allies exacerbate the move away from U.S. hegemony and rising demand for history's only constant and guaranteed store of wealth: gold.

Where foreign countries would hold reserves in U.S. bonds and currencies, the unpredictability in U.S. policy makes these assets less stable and attractive to central banks.

From London to New York, via Switzerland

The Bank of England remains the world's most important storage of bullion, as 100s of years of successfully maintaining the gold standard ensured its dominance in the gold market, which remains the case today.

It is a trusted storage place for other central banks and commercial institutions.

Recently, gold has been flowing from London to New York via Swiss foundries, where it is melted into smaller bars compatible with U.S. storage standards. This speaks of a particular rise in demand from the U.S. itself.

The difficulties in moving bullion from London to New York have, in turn, created physical scarcity, which in turn helped drive prises higher.

U.S. warehouses have meanwhile recorded their biggest decline in stockpiles since December.

"Despite easing tightness in the physical market, gold prices are extending gains. This comes as China continues to buy, and analysts hike price targets again. Gold sentiment seems to be improving in the financial community, with ETF holdings now pushing higher, nearing 87moz but well below levels hit during COVID, suggesting more room to run," says Meyer.

The Reasons for Rising Demand Don't Stop

Fears of elevated U.S. inflation amidst rising trade barriers are another crucial driver of the strong demand for gold.

But falling Eurozone bond values, in response to Germany's fiscal boost, also speak of rising fears of inflation in Europe.

Meyer thinks this could be stoking a new impulse of demand in Europe.

A steady fall of the Dollar in 2025 is also lowering the FX-adjusted cost of the metal for international buyers.

"Investors are also drawn to gold as a result of its limited counterparty risk, as opposed to bank deposits, derivatives and government loans," explains Meyer.