Gold Demand Surges to New Heights Amidst Economic Uncertainties
Gold demand has reached unprecedented levels, driven by both central banks and investors seeking refuge from escalating tariffs and other economic headwinds. The precious metal has hit consecutive record highs, surpassing $2,877 per ounce, while gold futures have climbed above $2,900.
Central banks have emerged as major purchasers of gold, motivated by inflation concerns, geopolitical tensions, and portfolio diversification. The World Gold Council reports a significant increase in purchases throughout 2024, particularly in the fourth quarter.
The Federal Reserve's interest rate cuts have fueled demand for gold-backed exchange-traded funds (ETFs) by reducing the attractiveness of yield-bearing assets. Global ETF demand has remained stable, marking the first year since 2020 without significant outflows.
Gold has outperformed the S&P 500 since the beginning of 2025, registering an 8% increase against the latter's 23.1% gain. Analysts at Goldman Sachs maintain their bullish stance on gold, predicting a $3,000 price target for the second quarter of 2026.
The escalating tariffs between the U.S., Mexico, and China have further fueled gold demand. The potential for additional tariffs has heightened uncertainties and prompted investors to seek safe haven assets.
Demand for gold is expected to hinge on U.S. monetary policy decisions and the impact of tariffs. Central banks are likely to continue purchasing the precious metal, while ETF inflows could increase if interest rates decline again.