The precious metal is certainly having a moment. On Feb. 24, President Donald Trump said he was worried that someone might have stolen gold from Fort Knox, the U.S. depository in Kentucky. Worries that he might place tariffs on gold have created a flurry of activity as bars in London, where the Bank of England is home to the world’s second-biggest stockpile, have been transported to New York, where the Federal Reserve has the largest reserves. There’s even speculation that the U.S. could revalue its gold holdings to give the Treasury $750 billion more to play with.
All told, gold futures have reached $2925.10 an ounce, returning 42% over the past 12 months, more than double the S&P 500 index’s 19% return, including reinvested dividends.
That’s not bad for a commodity that has little practical use and doesn’t produce earnings or pay interest to those that hold it. What’s more, the reasons offered for gold’s rally are often contradictory and don’t seem to hold up when investigated. It’s considered a defensive asset, but has been rising along with the stock market and as the economy chugs along. The precious metal, which is priced in dollars, should move in the opposite direction of the greenback, but it has bucked that rule as well. Gold is often thought of as an inflation hedge, but its big gain has coincided with a deceleration of price increases.
Yet just because everything we thought we knew about gold is wrong, it doesn’t mean investors should be rushing to unload the metal. “It’s just a pet rock, but I’m not selling it,” says David Jane, a portfolio manager of Premier Miton in London, who has about 5% of the $1 billion he manages allocated to gold. “You can’t pin down its price. I’m not going to cut and run.”
Historically, gold has been considered a store of value—and for good reason. There’s a limited supply—all of the gold in the world could be melted into a cube measuring 25 yards on each side, roughly the volume of one floor of an office building—and miners are only able to increase it by 1%-2% a year despite their best efforts, according to the World Gold Council. If supply is relatively fixed, then changes in price are all about demand.
And demand has picked up. Central banks across the world have been consistently increasing gold purchases as a way to diversify their reserves. De-dollarization isn’t new, but has taken on considerable urgency after the U.S. froze Russia’s assets in the wake of its invasion of Ukraine. Central bank purchases exceeded 1,000 tons for a third year in a row in 2024, according to the World Gold Council. China and India in particular have been snapping up gold for the past few years.
Central banks can’t entirely ignore the prices they pay for gold, but as the value of their holdings rise, it means they feel more comfortable stepping in to buy more, says Philip Newman, a founding partner of the Metals Focus consultancy, especially when prices decline. “[Gold] has a floor level of support that is strong and rising,” he explains.
There’s a decent level of retail demand for gold the world over; spending on jewelry rose 9% last year, according to the World Gold Council. China has even encouraged insurance funds to stock up on the metal, and even ordinary households in the world’s second-biggest economy may be looking to gold after the nation’s specular property crash during the Covid-19 pandemic. Others may be rushing to buy it simply because of the uncertainty created by Trump’s shake-up of the world order could be helping gold, even if stocks and the economy are booming, too.
“Gold plays well when there are tensions in the world,” says Krishan Gopaul, an analyst at the World Gold Council.
Other factors may also be contributing to the sharp rise in gold prices. The anticipation that the U.S. will levy taxes on gold imports in the near future pushed up the cost of physically delivering gold, which in turn pushed up prices for borrowing it. This created a kind of “short squeeze” in which anyone who had bet on gold prices falling suddenly had to reverse their positions, driving prices even higher, according to Gavekal Research. “This means that the fundamentals of the gold bull market are still strong and the technicals are rock solid,” Gavekal’s Louis-Vincent Gave writes.
Gold may also be benefiting from people having too much money to put to work, says Premier Miton’s Jane, creating momentum that just won’t quit. “The positive correlation between gold and equities suggests to me that it’s excess liquidity around that world that’s getting sucked into gold, just like it’s going into large-cap U.S. stocks and anything else that looks like fun at the moment,” Jane says. “This is speculation, not fear.”
The momentum should continue. While $3,000 could be an important psychological level, many analysts see the metal moving even higher. In February, Goldman Sachs and UBS raised their forecasts for 2025 to $3,100 and $3,200, respectively, while Bank of America’s Michael Widmer says gold could hit $3,500 an ounce if investment demand increases by 10%. “That’s a lot, but not impossible,” he writes. Worldwide, gold-backed exchange-traded funds attracted $3 billion in January, driven by demand from Europe, according to the World Gold Council, compared with net outflows a year earlier.
Buying gold can be very simple—as easy as heading to your local Costco or Walmart and buying a bar or coin. Those slices of gold are more souvenirs than serious investments, however, and selling them could be difficult. A better option could be to buy into a gold exchange-traded fund such as the $85 billion SPDR Gold Shares ETF, which has an expense ratio of 0.4%, or the $38 billion iShares Gold Trust, which charges 0.25%.
Mining stocks are another way in. Even though their earnings should increase more or less in line with higher gold prices, their share prices have lagged behind the metal itself over the past three years. That means they could be due for some catch-up. The $14 billion VanEck Gold Miners ETF, which owns big global miners Newmont and Barrick Gold and has an expense ratio of 0.51%, has returned 19% this year, including reinvested dividends, compared with 11% for the SPDR Gold ETF, while the $5 billion VanEck Junior Gold Miners ETF, which charges 0.52%, has returned 17%.
Among individual miners, Gold Fields, which operates in Australia, Ghana, Peru, and South Africa, is up 44% this year and could be poised to break out of a 30-year trading range, according to the Institutional View’s Andrew Addison. “Don’t want to miss this, because GFI boasts the biggest base of any gold stock,” he writes, while recommending that investors buy shares on pullbacks to $18 from a recent $19, in anticipation of a move above $20.
For those concerned that gold could lose momentum after its rally, silver might be the way to go. The two metals often trade similarly to each other, even though silver has more industrial uses than gold. But that extra use case is what has been keeping silver down, due to a slump in demand from the slowdown in Chinese manufacturing. Silver futures are up just 6.8% this year, compared with gold’s 10% rise, and could have more room to run if investors start getting more comfortable with the economy. Investors could consider the $14 billion iShares Silver Trust, which has an expense ratio of 0.5%.
“Investors aren’t focused on silver,” says Newman at Metals Focus. “But If gold gets to $3,000, you could see some switching.”
For now, though, gold is as good as, well, gold.
Write to Brian Swint at brian.swint@barrons.com