Gold will be king as long as there’s turmoil

Mon Mar 31 2025

As gold prices hit record highs due to central banks and ETFs buying at unparalleled levels, the yellow metal has doubled in value over the last 30 months.

Gold never glittered for Warren Buffett. But the Oracle of Omaha might feel a tinge of regret analysing bullion charts for the past couple of years. Often bracketed together by the world's greatest investor with assets 'that will never produce anything," gold has surprisingly been the most rewarding asset since late 2023, as central bankers jostled with money managers at top exchange traded funds in scooping up the yellow metal-at record prices.

On a rolling twelve-month basis, gold has surged nearly 37% to just shy of Friday's fresh lifetime record of $3,100 per troy ounce. It is extremely rare for any asset, including the hottest of stocks, to hit successive lifetime highs every third trading session. Gold has achieved that astonishing feat in 2025, building on the 30% plus gains last calendar year, as central banks and capital-protection funds continue to buy into the yellow metal.

As rapidly springing tariff walls around the planet's biggest trading blocs dent global growth prospects, gold is expected to build further on a mammoth rally that has seen its value double in just about 30 months. For an asset perceived as a mere passive inflation hedge, undiminished institutional appetite is expected to cement gold's millennium-old credentials as the safest store of value in times of extreme crises.

"A fresh bout of instability has gripped markets amid mounting worries over the impact of US President Donald Trump's tariffs, with another wave due to be announced on April 2," Nirmal Bang said in a report on precious metals. "Gold has climbed 15% this year...extending last year's strong gains as investors seek safety. Geopolitical conflicts...have also bolstered the metal's appeal."

Net purchases by ETFs so far this year climbed the equivalent of 128 tons. Globally, ETF ownership of gold is expanding rapidly, marking a departure from the pre-Covid caution, to the equivalent of about 2,710 tons by March. Central banks, which collectively have been net buyers in the past 15 years, incrementally added more than 3,175 tons in the past three years. Central banks are shopping at the cost of competing US dollar assets. Through the near 30% rise in value in 2024, the RBI bought nearly 73 tons of gold, quadrupling its incremental addition of the yellow metal through the year-and ranking behind just the Polish and Turkish central banks in bolstering its gold chest.

That trend is unlikely to reverse in FY26 as the triggers for gold's sustained surge-volatility and serious growth challenges spawned by disruptions to global trade-have not faded. And, as those factors have not receded into oblivion yet, the biggest gold buyers through FY25 are unlikely to look for alternative asset classes through the new fiscal year beginning April 1.

"Central bank buying is policy driven and thus difficult to forecast, but our surveys and analysis suggest that the current trend will remain in place," the World Gold Council (WGC) had said in its demand and price outlook for the metal. "In our view, demand in excess of 500 tonnes (the approximate long-term trend) should still have a net positive effect on performance. And we believe central bank demand in 2025 will surpass that."

No central banker, as the saying goes, ever lost his job for buying gold. WGC data showed that central bank and investor purchases "have more than offset a notable deceleration in consumer demand" through 2024. And the combination of growth dynamics, tariffs, trade challenges and interest rates favours gold demand-and, consequently, prices-through 2025.

"In all, this could prompt investors to look for hedges, such as gold, to counter risk," said the WGC's outlook for the metal. To be sure, gold has been handsomely rewarding through this millennium, but has traditionally been the harbinger of extreme crises in the global economy over the past half a century. And, even in nominal absolute terms, it took nearly three decades for the metal to hurdle the 1980 oil-crisis price peak, when the subprime sinkhole swallowed much of the world economy late 2007.

Source: https://economictimes.indiatimes.com/