Commodities: in like a lion, and out like a lamb?

The “Farmer’s Almanac” famously states that March weather often comes in like a lion and out like a lamb.

March is often the transition from winter to spring – at least in the Northern Hemisphere – and a volatile start to the month's weather can presage a quick transition and calmer weather as we exit the month.

This succinct summation of March’s changing weather also holds true for US financial markets, now hip-deep in tariff volatility, as efforts continue to transition US global trading relationships to a more level playing field.

The distinction is that spring and warmer temperatures will eventually come, while a global reset of trade relationships is not inevitable.

The misconceptions about gold

One place where volatility is not needed is the foundational assets of the central bank and treasury financial systems. So, we need to clear up three widely distributed misconceptions about gold.

The US Treasury does indeed hold gold

All 8,100 tons that the US Treasury holds in four locations – Fort Knox, the New York Federal Reserve Bank, the Denver Federal Reserve Bank, and West Point, NY – are reported on the Federal Reserve (Fed) balance sheet published weekly. [1}

Furthermore, the US Treasury conducts and publishes an audit of the physical gold supply each year, the most recent being 2023, providing reports that can be accessed online.[2]

And, in case you may need more proof, in a recent public interview, current Secretary of the Treasury Scott Bessent even offered to arrange a tour for any senator who wanted to see the gold firsthand at Fort Knox.[3]

Gold revaluation on the Fed's balance sheet will not affect Fed operations

Since it was placed on the balance sheet in 1971, the 8,100 tons of gold have been held at the book cost of $42.22 an ounce.[4]

If revalued to $3,000 an ounce (roughly today’s market price), it would add $773 billion in assets to the balance sheet, reducing the liability-asset ratio to 8.2:1 from 153:1.[5]

Gold's market value is already taken into consideration, or the Fed would be severely limited by its 153:1 liability-asset ratio.

Gold is highly unlikely to get a tariff

Most US gold is imported from Switzerland, although this year, the imports from the UK have been nearly ten times that from Switzerland.[6],[7]

The UK is one of the major countries with which the US actually has a trade surplus. Last year, it was $11.9 billion, as we export more to the UK than we import from it.[8] That fails to meet the aims of the tariffs to even the trade deficits.

The US trade deficit with Switzerland is rather large: $15.7 billion as of the fourth quarter of 2024.[9] This is due in part to selling refined gold to the US. However, Switzerland refines between 50% and 70% of all gold globally. Putting a tariff on a global monetary asset would not appear beneficial.

Gold going forward

We have been favorable on the chances of gold price rises based on consistent central bank demand at these high levels.

Over the last three years, the central bank demand has more than offset the drop in demand from ETF investors.[10] Central banks are buying to diversify their foreign exchange reserves away from US dollars and treasuries, which can become illiquid in the event of tariffs or sanctions, and instead purchase more gold.

ETF investors have been selling gold based on the historical relationship between real yields and gold prices. Since real yields have been rising, these investors have expected gold prices to fall. Now that real yields are falling, ETF investors have started to buy more gold. Central banks have continued to buy, with 2024 marking the third consecutive year they purchased more than 1,000 tons.[11]

Having expected gold to reach $2,800 by the year-end of 2024 and $3,000 in the first half of 2025, we now see the potential for gold prices to reach $3,300 by the year-end of 2025.

A contrary theme that warrants closer scrutiny

While struck by the number of materials-intensive spending announcements worldwide, we wonder whether that could be bullish for industrial metals' prices. We provide the following list:

• US shipbuilding
• Citing the need to revitalize shipbuilding in the US, the US Navy has announced its plan to expand its fleet at an annual cost of $40 billion until 2054 and create a new Office of Shipbuilding that will report directly to the White House.[12],[13]
• Artificial intelligence (AI) spending within the US
• Meta, Amazon, Alphabet, and Microsoft may spend $320 billion this year on highly energy-intensive AI data centers requiring large amounts of copper, aluminum, nickel, and lead.[14]
• US industry buildout
• US industry has announced a $1.7 trillion buildout of new physical manufacturing and data center properties, including Apple ($500 billion), OpenAI and Oracle ($500 billion), Softbank ($200 billion), TSMC chipmaker ($165 billion), and Honda ($1 billion).[15]
• Ukraine rebuilding
• The German Marshall Fund of the US, a non-partisan American public policy think tank that aims to promote cooperation and understanding between North America and the European Union developed after World War II, estimates the cost to rebuild Ukraine over the next decade to be $460 billion.[16]
• Gaza rebuilding
• The United Nations estimates it will cost $80 billion to rebuild Gaza.[17]
• European defense spending
• Germany proposed €500 billion ($546 billion) to address/replace US withdrawal.[18]
• China activity
• The energy transition remains underway in the US and Europe; however, not at nearly the same pace as China's metals-intensive energy transition continues. Sales of all types of electric vehicles – battery and hybrid – in China rose 40% last year.[19] China’s defense spending is also up 7.2% for 2025, along with a GDP growth target of “about 5%” for 2025.[20],[21]

Final thoughts

All these projects represent spending for creating physical buildings, materials, warehouses, data centers, ships, munitions, tanks, artillery, and infrastructure, which use copper for electrical connections and electricity distribution, aluminum for weight and corrosion resistance, zinc to galvanize steel, nickel for batteries and armor plating, and lead for battery and backup power. Those metals can be found in the Bloomberg Industrial Metals index. This index has a close correlation to economic expansions and is not something we believe investors typically allocate to when there is a potential for stagflation. However, as evident by these spending targets, the expansion is coming in areas long neglected (US and European defense capabilities) and in reshoring some industries to the US and US technology. Finally, we believe the demand for these metals is coming at a time when supply lines are under threat of disruption via tariffs and friendshoring.[22] Reflected in the German government embarking in expansive fiscal spending for the first time in a generation, the conviction in industrial metals demonstrates the conviction that governments and companies have committed to the projects listed above.

Robert Minter is director of ETF investment strategy at abrdn.

ii is an abrdn business. 
abrdn is a global investment company that helps customers plan, save and invest for their future

1 "Federal Reserve Balance Sheet: Factors Affecting Reserve Balances - H.4.1." Board of Governors of the Federal Reserve System, March 2025. https://www.federalreserve.gov/releases/h41/default.htm.
2 "Factors Affecting Reserve Balances of Depository Institutions." Federal Reserve Balance Sheet: Factors Affecting Reserve Balances - H.4.1. Board of Governors of the Federal Reserve System, March 2025. https://www.federalreserve.gov/releases/h41/20250306/.
3 "Bessent Says US 'Long Way' From Boosting Longer-Term Debt Sales." Bloomberg, February 2025. https://www.bloomberg.com/news/articles/2025-02-20/bessent-says-terming-out-us-debt-a-long-way-off?.
4 "Fort Knox Facts." Fort Knox Bullion Depository. United States Mint, October 2025. https://www.usmint.gov/learn/tours-and-locations/fort-knox?.
5 "Federal Reserve Balance Sheet: Factors Affecting Reserve Balances - H.4.1." Board of Governors of the Federal Reserve System. U.S. Federal Reserve, March 2025. https://www.federalreserve.gov/releases/h41/20250306/.
6 "Importing Gold Into The U.S.: Coins, Medals, and Bullion." USA Customs Clearance, January 2025. https://usacustomsclearance.com/process/importing-gold-into-the-us/.
7 “America’s appetite for gold is ‘sucking’ bullion out of other countries.” CNBC, February 2025. https://www.cnbc.com/2025/02/28/us-gold-demand-is-sucking-bullion-out-of-other-countries.html.
8 "United Kingdom." Office of the United States Trade Representative. Executive Office of the President of the United States. March 2025. https://ustr.gov/countries-regions/europe-middle-east/europe/united-kingdom.
9 "Goods and Services by Selected Countries and Areas: Quarterly – Balance of Payments Basis (exhibit 20)." U.S. International Trade in Goods and Services. U.S. Bureau of Economic Analysis, January 2025. https://www.bea.gov/news/2025/us-international-trade-goods-and-services-january-2025#.
10 Bloomberg data: ETF gold holdings 12/31/2019 to 3/13/2025.
11 "China's central bank ups gold reserves for fourth straight month in February." Reuters, March 2025. https://www.reuters.com/world/china/chinas-central-bank-ups-gold-reserves-fourth-straight-month-february-2025-03-07/.
12 "Navy shipbuilding plan would cost $1 trillion over the next 30 years." Navy Times, January 2025. https://www.navytimes.com/news/your-navy/2025/01/08/navy-shipbuilding-plan-would-cost-1-trillion-over-the-next-30-years/.
13 "Trump to launch new White House office focused on shipbuilding." Defense News, March 2025. https://www.defensenews.com/news/pentagon-congress/2025/03/05/trump-to-launch-new-white-house-office-focused-on-shipbuilding/.
14 "Tech megacaps plan to spend more than $300 billion in 2025 as AI race intensifies." CNBC, February 2025. https://www.cnbc.com/2025/02/08/tech-megacaps-to-spend-more-than-300-billion-in-2025-to-win-in-ai.html.
15 "Remarks by President Trump in joint address to Congress." The White House, March 2025. https://www.whitehouse.gov/remarks/2025/03/remarks-by-president-trump-in-joint-address-to-congress/.
16 "Pricing Ukrainian Reconstruction." The German Marshall Fund of the United States, October 2024. https://www.gmfus.org/news/pricing-ukrainian-reconstruction.
17 "Gaza Strip will cost $80 billion to rebuild - but who will rule it?" The Jerusalem Post, January 2025. https://www.jpost.com/middle-east/article-838572.
18 "‘A really big bazooka’: German defense spending likely to rise after parties agree historic debt change." CNN Business, March 2025. https://www.cnn.com/2025/03/05/business/germany-debt-overhaul-defense-spending-intl/index.html.
19 "China’s electric car sales grew in 2024 as sales of gasoline cars plunged." Associated Press, January 2025. https://apnews.com/article/china-autos-evs-exports-3f5860634a1d146446dd0dd9e78c2abb.
20 “China will increase its defense budget 7.2% this year." Associated Press, March 2025. https://apnews.com/article/china-defense-budget-taiwan-4ac7cbdc7d5b889732cd55916ff7eb36.
21 "China sticks to an economic growth target of ‘around 5%' despite a looming trade war with US." Associated Press, March 2025. https://apnews.com/article/china-congress-economy-defense-tariffs-d6192774e13ccb7e28e06d4c3f2173c4.
22 Friendshoring is a practice of shifting trade away from cheapest to deliver, toward a smaller and potentially more expensive set of friendly or allied countries.