Gold Demand Soars to Record Highs Amidst Economic Uncertainties
Gold demand continues to surge to unprecedented levels, fueled by significant purchases from central banks and investors seeking refuge from escalating tariffs. On Wednesday, gold reached record highs for the fifth consecutive day, surpassing $2,877 per ounce in trading, with futures (GC=F) also climbing to new highs above $2,900.
Central banks have been aggressively acquiring gold, driven by concerns over inflation, geopolitical tensions, and the need to diversify their portfolios. According to the World Gold Council, central bank purchases reached a record high of 4,974 tonnes in 2024.
The Federal Reserve's rate-cutting cycle has also contributed to the bullish sentiment for gold, as it has prompted global inflows into physical-backed gold exchange-traded funds (ETFs), particularly from Western investors. The lower interest rate environment favors gold as it competes less favorably with yield-bearing assets. Global ETF demand remained stable in 2024, with holdings remaining largely unchanged compared to the previous three years.
Gold has gained approximately 8% year-to-date and outperformed the S&P 500's (GSPC) gain of 23.1% in 2024. Goldman Sachs analysts maintain their positive outlook for gold, predicting a price forecast of $3,000 per troy ounce in the second quarter of 2026.
Escalating tariffs continue to be a major factor driving gold demand. While tariffs announced over the weekend against Mexico and Canada have been delayed, 10% tariffs on select imports from China went into effect on Tuesday.
According to Joe Cavatoni, market strategist at the World Gold Council, the demand for gold in 2025 will hinge on US policy, including Federal Reserve rate cuts and the impact of tariffs. He emphasizes that central banks are likely to continue making significant purchases, while the reintroduction of rate cuts could boost gold ETF inflows from Western investors.