The price of gold is experiencing a remarkable surge this year, climbing 39% year to date and gaining 8% in just the past month. This sharp increase is fueled by multiple factors that are driving investors toward the safe-haven asset.
Tensions in various geopolitical landscapes, persistently high inflation, and disruptions in global trade due to tariffs are pushing many to consider gold a secure investment during uncertain times. The traditional perception of gold as a safe haven is more relevant now than ever, as anxieties about the economic and political climate loom large.
However, the most significant factor currently influencing the rise in gold prices is the aggressive buying activity from central banks worldwide. In a bid to diversify their holdings away from dollar-denominated assets, central banks have been on a gold accumulation spree that began in 2022, prompted by geopolitical events such as Russia’s invasion of Ukraine and subsequent U.S. sanctions.
Recent data reveals that central banks and sovereign institutions have purchased over 1,000 tons of gold annually for the past three years, and this trend shows no signs of slowing down. A World Gold Council survey indicates that 43% of central banks plan to continue increasing their gold reserves, while 95% believe that overall gold reserves will keep rising over the next year. Interestingly, gold recently surpassed the euro as the second-largest asset in central bank reserves, now constituting 20% of those reserves compared to the euro’s 16%.
With gold prices reaching record highs, analysts predict further increases as the Federal Reserve appears ready to cut interest rates again in the near future. Futures traders suggest there is a 92% chance of a quarter-point reduction, which could weaken the dollar and make gold more affordable for international buyers, thereby potentially driving the price even higher.
For investors seeking to capitalize on potential gains in gold, one practical avenue is through investment in the MSCI Global Gold Miners ETF, which offers exposure to a diversified selection of gold-related stocks. This ETF manages approximately $2 billion in assets and includes 42 different holdings, providing a buffer against the risks inherent in individual stocks. Notable holdings in the fund include Newmont, Agnico Eagle Mines, Barrick Mining, and Wheaton Precious Metals, though none of the remaining stocks comprise more than 5% of the portfolio.
The ETF has seen impressive growth, more than doubling in value this year, boasting a 105% increase. With an expense ratio of 0.39%, it remains competitively priced within its category.
Currently, gold is priced around $3,675 an ounce, and investment bank Goldman Sachs has projected that prices could soar to $5,000 an ounce if global investors grow concerned about the Federal Reserve’s autonomy—a sentiment that is becoming increasingly plausible. In such a scenario, having exposure to gold in investment portfolios could prove invaluable.
