Trade war fears and disappointing data have sparked a flood of defensive buying activity in consumer staples, utilities, and healthcare stocks. Gold has been swept up in the flight to safety, riding a string of record highs to top $2,950 an ounce for the first time.
The metal's prices outshone the broader markets in 2024. They boasted a 26% return over the S&P 500’s 23% gain. So far, the precious metal has risen 12% YTD versus less than 2% for the S&P. Gold is now riding an eight-week win streak, its longest since 2020. Meanwhile, bitcoin prices have fallen just as much.
Goldman Sachs just upped its year-end forecast for gold prices to $3,100 based on strong central bank demand and inflows into gold ETF holdings. And it upped its forecast as high as $3,300 if tariff uncertainty persists. That would mark a roughly 26% gain for the year. The revised forecast joins a host of other bullish predictions from leading banks. Citigroup said it expects prices to hit $3,000 an ounce within three months, saying, “the gold bull market looks set to continue under Trump 2.0.”
Global tariffs, sticky inflation, and higher interest rates have perpetuated an uncertain investing climate. That's prompting investors to turn to the yellow metal as a hedge. On a VettaFi webcast this week, we asked our live advisor audience how they were diversifying their client portfolios. Out of 232 respondents, 42% said they were diversifying into gold, while only 14% looked to digital assets.
Gold ETF Flows Glimmer Once More
Not surprisingly, the recent run-up has been bolstered by massive inflows into gold ETFs. These ETFs saw $5 billion in net inflows last week — the biggest haul for bullion since 2022 — the bulk of which poured into the SPDR Gold Trust (GLD). The world’s largest gold ETF broke its single-day flow record, taking in $2 billion on Friday alone. On Monday, trading volume for GLD — a favorite among hedge funds and other institutional investors — also rose 30% from the average daily volume of the previous month.
“Gold basically thrives on uncertainty and we have had an awful lot of that,” said George Milling-Stanley, chief gold strategist at State Street Global Advisors. But he cautioned it could be a while before the yellow metal breaks above the key resistance level of $3,000. GLD also beat its previous weekly high of $3.5 billion back in February 2009. That was during the depths of the financial crisis, pushing it up to a historic $87 billion in AUM.
The lower-cost SPDR Gold MiniShares Trust (GLDM), which has been a favorite among retail investors, and the iShares Gold Trust (IAU) also led the leaderboard, taking in $360 million and $670 million in net inflows for the week, respectively.
Who Else Is Buying?
Strong demand in the U.K., Germany, and Ireland dominated ETF inflows in January. That offset net outflows from North American investors. Europe was actually bullion’s biggest net seller last year. But it has started to embrace the precious metal again. That's due to falling bond yields and political uncertainties across the region.
Collapsing consumer confidence has even led Costco’s gold bars to remain a hot commodity in 2025. More shoppers have been scooping up the yellow metal, along with their usual rotisserie chicken and bulk cleaning supplies, as a diversifier and store of value.
Beyond retail demand, which ebbs and flows, central banks have been the most pivotal player in the gold equation in recent years. China has consistently hoarded gold, particularly as U.S. sanctions on Russia have ramped up. Emerging market central banks have aggressively boosted their gold reserves, adding around 333 tons in late 2024 alone. The desire is to diversify reserves away from U.S. Treasuries and toward gold. A recent survey conducted by the World Gold Council found 69% of global central banks plan to build on their gold reserves in the future — with 90% of emerging market central banks expecting to add to their reserves.
Gold's emergence as both a dependable safe haven and a top-performing asset underscores its significance during uncertain economic periods. Notably, gold's annualized return over the past 20 years has been comparable to that of the S&P 500. Central banks, as long-term holders, create a stable foundation that should underpin the metal's price trajectory. Additionally, gold's bullish performance highlights its value as an uncorrelated asset, providing investors with a sense of stability while mirroring the cautious sentiment that has permeated global markets. While declining uncertainty could lead to a tactical pullback in prices, many on Wall Street believe long-gold positions remain a strong hedge.
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