Gold has hit a record high, reaching a price of US$3,300 per ounce, and is on the rise due to a combination of factors, including strong central bank buying, investor demand for gold bullion ETFs, and trade war tensions. The current gold rally has been going since 2024, driven by inflation concerns, central bank easing and geopolitical uncertainty. But one of the main differences between this and previous rallies is that central banks are “aggressively” buying the metal. According to Nawojka Wachowiak, a senior portfolio manager with Ninepoint Partners in Toronto, global central banks purchased over 1,000 metric tons of gold for the third year in a row in 2024. This is a staggering amount, equivalent to twice the combined annual production of Barrick Gold Corp., Newmont Corp., and Agnico Eagle Mines Ltd., North America’s largest producers. The renewed interest in gold bullion ETFs this year is another factor driving the rally. After they posted global net outflows in 2024, investors have stepped back into the market through gold equity or bullion ETF buying. Western investors, who typically play a big part in the rally in gold and gold equities, were absent last year and have now returned. Emerging markets, including China, are also contributing to the bounce back. Investors are flocking to gold as a hedge against uncertainty, which is at a high due to U.S. President Donald Trump’s trade policies and recession fears. The high level of uncertainty is creating a situation where gold is being used as a safety haven and a place to hide. As Wachowiak said, “We are watching to see how the economy reacts to tariffs, but the reality is that that’s going to take a bit of time.” In the meantime, gold is being used as a refuge from the uncertainty. Another key driver of the rally is the growing recognition of gold as a globally recognized asset that can retain value during periods of uncertainty. As Nimar Bangash, CEO of Toronto-based Obsiido Alternative Investments Inc., said, “There is a flight to safe-haven assets. And in these types of periods, physical assets, things that inherently function and store value, … there is sudden interest or a surge of interest in those types of investments.”
Opportunities in 2025
Gold can be used as a portfolio diversifier, as it tends to have low correlation with stocks and bonds. Wachowiak suggested that maintaining a 5 – 15% holding in precious metals, including gold, throughout market cycles can “alleviate some of that volatility and risk.”
However, Bangash noted that in a normal market environment, where markets are less volatile month over month, “gold is perhaps less useful as a day-to-day hedge.” But for black swan events, gold has a strong role to play. The opportunity in gold stocks is also significant. Wachowiak sees value in gold stocks because they have taken advantage of the higher price of gold and their costs have stabilized, setting them up for a rebound. She noted that while gold companies “didn’t really perform” in 2024, they’re now taking advantage of the higher price of gold and their costs have stabilized, setting them up for a rebound. Bangash also mentioned that the entire gold sector, including explorers, developers and producers, offers diversification opportunities. He noted that physical and tangible assets in private markets, such as infrastructure and farmland investments, have been historically resilient in market downturns. Other diversification opportunities
Private markets, such as infrastructure and farmland investments, offer another diversification opportunity for investors. These types of investments have been historically resilient in market downturns and can provide a hedge against inflation. Bangash also suggested that pockets of the private credit market could present an opportunity as many private companies may need working capital or bridge loans. However, he acknowledged that investing in private markets is not suitable for everyone. Investing in private markets is a client suitability decision, and it requires a long-term, strategic view on different asset classes. Bangash said that having a process, a strategic asset mix, and a long-term view on different asset classes can help a portfolio be resilient in uncertain times. Given the ongoing uncertainty and demand from emerging markets, strong central bank buying, and shifts in monetary policy, Wachowiak sees 2025 as a strong year for gold. She noted that all of these drivers have created a situation where gold is set up for a performance in the short term, as well as medium to long term. Bangash, on the other hand, said that while he and his firm do not allocate to physical gold or gold-based funds, “we certainly appreciate that allocation to gold in a portfolio could have a role to play, especially right now.”
**A Strong Year for Gold in 2025**
The combination of factors driving the gold rally has created a situation where gold is set up for a strong performance in 2025. Wachowiak sees an increase in capital returns in the form of dividends and share buybacks in gold stocks, as well as an increase in capital returns in the entire gold sector. In conclusion, the current gold rally is driven by a combination of factors, including strong central bank buying, investor demand for gold bullion ETFs, and trade war tensions. Gold is being used as a safety haven and a place to hide in uncertain times, and its price has reached a record high. As Wachowiak said, “All of those drivers, in our view, have created a situation where gold is set up for a performance, not just in the short term, but medium to long term as well.