Gold's bull run unlikely to end anytime soon, analysts say

12/05/2025 02:54 AST

Gold's bull run is likely to continue as a softer dollar, a spike in market volatility and geopolitical concerns continue to spur investors to seek refuge in the safe haven asset, analysts say.

According to data from the World Gold Council (WGC), the yellow metal rose 6.6 per cent month on month in April, having breached the all time record and closing above $3,500 per ounce for the first time. While the metal pared gains later, it still closed the month above $3,300 per ounce.

Gold is up by nearly 27 per cent year to date, significantly outperforming major asset classes. The metal has been supported by a combination of US trade policy uncertainty and, more generally, geoeconomic risk, aweakening US dollar, higher inflation expectations combined with lower bond yields and continued central bank demand.

Against this backdrop, investment flows via gold exchange traded funds (ETFs) have significantly ramped up. "In Q1, gold ETFs amassed US$21bn of inflows - the strongest quarter in three years - with an additional US$11bn in April. Collectively, US funds have led the way, but Chinese funds have increased their holdings by a whopping 77 per cent year to date," a report by the WGC said.

Gold holdings by funds listed in Western markets are 575 tonnes (or 15 per cent) below their record high. In addition, Asian gold ETFs, driven by Chinese and Indian investors, have been consistently growing for the past two years, signalling a structural shift in adoption.

Investors have grown increasingly concerned over the growth and inflation outlook from the fallout of the ongoing trade war, both in the US and globally. "The rise in uncertainty around trade policy and international relations has been supportive of gold as investors typically turn towards safe-haven assets for downside protection in those types of environments," the WGC said.

The global body estimates that trade concerns have accounted for approximately 10 per cent to 15 per cent of gold's return year to date, stemming from US dollar devaluation, heightened geopolitical and market risk.

A major concern regarding US trade policies is the potential effect they could have on US and global inflation. Analysts say short-term inflation is expected to rise in the US according to consumers and market measures. Generally, high inflation is supportive for gold as investors seek out real assets for protection amidst falling purchasing power.

A major factor in gold's continued rise has been central bank buying. A growing number of central banks are diversifying their reserves away from the US dollar, often turning to gold as a neutral reserve asset. Notably, China, India, Turkey, and Russia have been leading this trend. "In the last three years to 2024, central banks bought more than 1,000 tons in each year, a process that looks set to continue in 2025 and beyond, thereby underpinning the market as supply is being removed from the market," Ole Hansen, Saxo bank's head of commodity strategy, said in a note.

While investment flows are the key driver of large gold price movements, consumers are an important contributor to gold's performance in the medium and long term.

Gold demand in India, the world's largest gold jewellery consumer, witnessed a 15 per cent on-year decline to 118.1 tonnes in the January-March quarter of this year, even as value grew by 22 per cent to Rs940.3 billion owing to surging prices. "Higher gold prices have been deterring some jewellery buyers and while consumers can adjust to higher price levels, they still need time to adapt," the WGC said.

Khaleej Times