FT: Gold’s record-breaking rally

Pic.: FT montage/Bloomberg

The bullion price has rocketed nearly 50 per cent this year to a record high above $4,000 per troy ounce after US President Donald Trump’s trade war sparked a rush to haven assets and sent the dollar tumbling, ‘Financial Times’ stresses.

But even when tariff-induced volatility in financial markets receded over the summer, the gold price accelerated, with a near-12 per cent jump in September alone marking the biggest monthly gain since 2011.

A key catalyst, say asset managers, has been a wider range of investors jumping on the bandwagon of soaring prices after years of record buying by central bank reserve managers.

“It’s gold-plated Fomo,” said Luca Paolini, chief strategist at Pictet Asset Management, referring to a “fear of missing out” that is also seen as fuelling huge gains in megacap technology stocks and other markets such as credit.

“Gold has become so big...  that you cannot ignore it. There becomes a level when it becomes impossible not to own it.”

The market has gone “a bit berserk”, said Nicky Shiels, an analyst at trading firm and precious metals refinery MKS Pamp, adding that the “game-changing driver” has been inflows into exchange traded funds, a cheap and popular investment vehicle used by both retail and institutional investors.

Net inflows into gold-backed ETFs surged to $13.6bn over the past four weeks, according to World Gold Council data, meaning that more than $60bn net has flowed in so far in 2025, a record for a calendar year.

The amount of gold held by these ETFs has risen above 3,800 tonnes, close to its peak during the Covid-19 pandemic sell-off in risky assets.

Behind this recent price surge — the biggest since the 1979 oil price shock — is the first signs of a shift among investors, from individuals to pension funds, to make a long-term allocation to precious metals, in the same way that they would do for equities and bonds, say analysts.

Such a shift could mean trillions of dollars pouring into bullion and mark a major change from the 2 per cent that fund managers currently allocate to gold, according to a recent Bank of America survey.

“For the first time in a long time” there has been a significant number of enquiries from clients exploring taking a long-term holding in gold, said Michael Widmer, head of metals research at BofA.

Gold, which unlike bonds provides no income, has long been distrusted by some mainstream investors as hard to value or predict. Warren Buffett once referred to the yellow metal as being “neither of much use nor procreative”.

Investors poured into bullion as central banks resorted to quantitative easing in the wake of the global financial crisis. But fears of hyperinflation proved misplaced, and gold failed to surpass the high it hit in 2011 until the summer of 2020.

However, volatility in bond markets, amid concerns over record sovereign issuance across rich nations, is making fixed income less attractive as a portfolio balancing tool and adding to gold’s shine once more.

Another driver is the worry in some quarters that policymakers will respond to record sovereign debt levels by allowing inflation to run above target, in effect devaluing assets, especially given Trump’s pressure on the Federal Reserve to keep rates low.

Gold is being used as a “tail hedge” by investors, according to Francesca Fornasari, head of currency solutions at Insight Investment.

The view is “we don’t want to have [a loss of Fed independence] as our base case, but we want to have something on”, she added.

…British analysts forgot to say the most important thing.

First, the dollar (as well as pound and euro) is devaluing in the financial world. It's not the gold that's rising in price, but the world currencies  that are depreciating.

Second, the most insightful people have already realized that they need to “move into gold” because the dollar is losing its global financial hegemony.

As a result people are looking to gold as a “safe haven” for their savings.

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