The price of gold surpassed $3,000 for the first time on Friday as investors continued to flock to the safe haven asset amid global market uncertainty.
It reached $3,004 at its peak last week, but fell slightly to $2,997 over the weekend. Yet the precious metal’s price is still up 14.8% since the start of the year as the US’ escalating trade war unsettles investors.
Gold became notably more popular last year, with its price soaring 26.6% throughout 2024 despite rising US bond yields and a strengthening dollar – two factors that usually work against the precious metal.
Diego Franzin, head of portfolio strategies at Plenisfer, said gold’s rally last year notwithstanding these headwinds marks “a structural shift” in the asset class that is “likely to persist”.
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“Gold has become increasingly relevant in investor portfolios, and we do not expect this trend to reverse in the current year – quite the opposite,” he added.
“In today’s climate of heightened uncertainty, we believe gold is set to play an even greater role in protecting investments and stabilising portfolios.
“As the ultimate safe-haven asset, gold will continue to be supported by uncertainty surrounding geopolitical developments, trade tensions, and fiscal imbalances – particularly in the US – as well as by central bank demand.”
Accelerating demand
Some investors who didn’t partake in with last year’s gold rally appear to be joining the band wagon in 2025, according to HANetf’s head of research Tom Bailey.
European investors removed $5.8bn from gold exchange-traded commodities (ETCs) last year, but have changed their tune and added $3.2bn to them in the first few months of 2025.
If this increased demand from Europe persists – as well as heightened institutional buying from India and China – then the investment case for gold could remain strong, according to Bailey.
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“We’ve been here before, with the price of gold breaching several new highs both this year and last year. Persistent geopolitical and economic uncertainties, particularly around tariffs, continue to support gold’s appeal as a safe-haven asset,” he said.
“After a stellar performance in 2024, gold is showing the potential to maintain this momentum in 2025, and we expect further upside from here.”
Analysts at Bank of America speculated that gold could reach as high as $3,500 this year if investment demand rises by 10%.
Risks remain
The main drivers of gold may remain strong, but there are some potential roadblocks ahead that could halt its rally, according to Franzin.
Many investors have moved out of Treasuries in favour of gold, but that could be reversed if the US’ spending cuts lead to tighter debt issuance, thus reducing the supply of Treasuries and supporting their value.
Likewise, if China’s stockmarket recovers this year then local capital may shift away from gold and back into domestic equities.
Franzin noted that while risks such as these remain on the radar, the current outlook for gold is still rosy.
“It’s worth noting that current gold prices are near historic highs relative to several valuation metrics, including gold-to-oil, gold-to-wages, and gold-to-real-estate ratios in the US,” he said.
“Whether gold embarks on another rally to new record levels will depend on a number of factors. However, we will continue to view gold as a key asset for portfolio stabilisation and protection against potential new waves of inflation.”
This story was written by our sister title, Portfolio Adviser
