Market Chaos Ignites Gold’s Surge– Are You In?

Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s potential portfolio benefits.

Got Gold?

If the answer is yes, you are one of the lucky winners so far in 2025. If the answer is no, take January as another great example of why you might want some gold exposure in your portfolio. A storm of events—DeepSeek’s release, a tech stock sell-off, an unexpected wave of U.S. executive orders, escalating tariffs and trade tensions and rising inflation concerns—shook global financial markets.

Historically, gold has served as a potential haven, a possible hedge against market uncertainty and volatility, geopolitical risk, and inflation—in other words, as a place to hide when there is a heightened level of risk and fear. However, like any asset, gold is not without its own risks, including price fluctuations, opportunity costs, and the impact of changing economic conditions.

Despite these potential benefits, investor sentiment toward gold has been exceptionally weak for many years. That sentiment, however, began to shift in January as market attention turned back to the very risks that have long supported gold. In such context, gold surged to a new all-time high of $2,798.41 per ounce on 31 January, marking a monthly gain of $173.91 per ounce, or 6.63%. As of 31 January, gold prices have risen by 77.5% over the past five years¹, keeping in mind that past performance is not indicative of future results.

Gold Rush 2.0: Western Investors Fuel the Comeback

Gold has had an impressive start to the year, potentially signaling the long-awaited return of Western investors. Interest in gold is accelerating, evidenced by a 0.70% increase in gold bullion-backed ETF holdings². Gold is quite literally making its way west—to New York, to be exact. Trump’s tariff threats have ignited a physical gold rush, with investors and traders scrambling to secure bullion before potential price hikes. This has disrupted markets, widened price spreads between London and New York, further tightening supply³.

Typically, gold trades in contango (i.e., longer-dated futures contracts are priced higher than near-term contracts or the current spot price). However, it is now experiencing instances of backwardation, where the spot price exceeds futures prices. Gold’s 1-month lease rates jumped to as high as 4% recently⁴, reflecting the crunch. Not bad for a non-yielding asset!

The Power Players Behind Gold’s Record-Breaking Surge

While market tightness puts upward pressure on gold prices, the real drivers of its strength are central banks and investors. The World Gold Council 2024 Gold Demand Trends report estimates total gold demand reached record levels last year, both in tonnage (4,974 tonnes) and USD value ($382 billion).

For the third consecutive year, central banks were net purchasers of more than 1,000 tonnes of gold— more than twice their average annual purchases from 2010 to 2021. By the end of Q3 2024, they had added 712 tonnes, leading many to believe they would fall short of the 1,000-tonne mark. However, they picked up the pace significantly in Q4 purchasing 333 tonnes, finishing just 6 tonnes below the 2023 total. This sustained central bank buying remains a strong pillar of demand, with the trend expected to continue in the long term.

Investment demand rose 25%, but this increase was the result of a slowdown in ETF outflows rather than fresh inflows. While India and China saw significant increases in physical gold demand, global bar and coin demand remained flat year-over-year. In other words, investment demand increased because outflows from the gold bullion backed ETFs slowed down significantly (-6.8 tonnes in 2024 vs -244.2 tonnes in 2023), rather than due to increased buying. A slowdown of outflows in 2024, followed by inflows into the global gold bullion ETFs in early 2025, could signal renewed Western investor interest in gold and potential for higher prices ahead.

2024 Gold Demand Trends

Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council.
Note: For an explanation of these terms, please see the Notes and definitions download: https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-full-year-2024

Gold Miners Shine: A Breakout Start to 2025

Earnings season for the sector kicks off in mid-February. This is a crucial reporting period, as companies will release full-year 2024 results and provide 2025 guidance. Markets will focus on operating cost guidance, assessing margin expansion and free cash flow generation. Companies that meet or exceed 2024 targets and 2025 expectations may be rewarded, while those that miss could see their share prices decline.

Project updates will also be key, with investors closely watching timelines for permitting and production, as well as any capital cost revisions. Additionally, announcements on dividends and share buyback programs will be in focus.

For gold equities to be revalued from their historically low levels, high gold prices and renewed investor interest must be supported by strong performance from gold miners. The low correlation of gold and gold equities with most asset classes enhances their diversification benefits. Keeping in mind risks such as sector concentration and the inherent risks of investing in natural resources companies, this can make them an attractive option for investors today.

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Investors should also consider risks like operational challenges in gold mining, regulatory changes impacting mining companies, or shifts in global demand for gold, which could all affect the long-term performance of gold equities.