Gold is on a tear. Prices have surged 50% in 2025 alone, marking the metal’s biggest rally since the 1970s.
But with prices now trading at US$4000 (NZ$6900) an ounce, is this the result of solid fundamentals or just fear of missing out?
The answer, it seems, is a mix of both.
Fund manager Amova said central banks have been steady buyers of physical gold for years, typically holding it alongside foreign currency bonds as part of their reserves.
Some central banks may also be diversifying away from the US dollar and other fiat currencies.
The freezing of Russia’s currency reserves in European banks following its invasion of Ukraine may have added urgency to that diversification.
Still, quantifying how much gold central banks have been buying over the years is considered a dark art, rife with rumour and speculation, rather than an exact science.
The physical gold market is opaque and over-the-counter, unlike gold futures and derivatives traded on exchanges in the US, Shanghai, and Tokyo.
The rise of gold ETFs
According to Amova’s head of bonds and currencies Fergus McDonald, the other major shift in gold markets has been the rise of exchange-traded funds (ETFs).
“ETFs have become far more popular with institutional investors in recent years,” he said.
That made it more accessible.
“Gold is much easier to buy – you can buy it on your computer, and it also reduces one of the big detractors of gold, you have to store it somewhere and someone can steal it.”
McDonald believed the ability to buy and sell gold with a click has helped fuel the rally, allowing investors worldwide to jump on the momentum.
He added that gold has long been a store of wealth, an asset class as established as bonds, equities, or currencies.
FOMO or fundamental?
McDonald said gold’s recent rise was also a function of rising disgruntlement and distrust of governments and especially, their economic policies.
That price action, he argued, was reflected in the rise of both gold and digital currencies.
McDonald cautioned that although gold had both fundamental and short-term reasons for rising, no asset rises in price forever.
“Momentum is a great thing, but once momentum passes, gold may do nothing for many years or fall in value,” he said.
Retail investors hold steady
Online gold exchange Goldie said gold remained a tangible and trusted asset that has preserved value through history.
Its performance since the 1970s, they argue, spoke for itself.
“When financial markets are volatile, gold tends to outperform,” the company said.
Goldie saw both small and large professional investors increase their holdings of physical gold.
Founder Cameron MacLachlan said he was surprised that record prices have not prompted at least some of their clients to cash out.
“What’s been remarkable is that almost all – over 98 percent of our investors are holding for the long term. Gold is regarded as a safe, slow, and steady investment.”
MacLachlan believed gold and other precious metals had a place in any diversified portfolio.
He also noted a shift in investor demographics.
“Our client base is typically under 35 and female, and both tech and financially savvy.”
By RNZ’s Jeffrey Halley
