Gold Price Soars to Record Highs as Investors Seek Refuge from Stock Market Risk
$64 Billion Pours into Gold ETFs This Year as Institutions Begin to Show Unprecedented Interest, Reuters Reports
- Gold prices have surged to record highs, with spot prices nearing $4,000 per ounce, as investors seek a safe-haven asset.
- The primary driver is investors moving capital out of the stock market due to concerns about high valuations and economic uncertainty.
- This shift has led to a record-breaking influx of over $64 billion into gold Exchange-Traded Funds (ETFs) this year.
- Major financial institutions, such as Morgan Stanley and Goldman Sachs, are endorsing gold as a hedge against inflation and market risk, further stimulating investor interest.
The price of gold has continued its relentless surge to historic highs, with investors fleeing risk in the stock market and channeling money into gold Exchange-Traded Funds (ETFs).
This year, these ETFs have broken records by attracting over $64 billion in inflows, according to industry data cited by Reuters.
Reuters reported that the spot gold price recently touched $3,990.85 per ounce, while gold futures surpassed the $4,000 per ounce mark.
This upward momentum has led to a rapid and enormous flow of capital into gold ETFs globally.
State Street Investment Management noted significant inflows into US-listed gold ETFs, including the SPDR Gold Shares fund, which reached an all-time high of $35 billion by the end of September.
This comfortably exceeds the fund's previous full-year record of $29 billion set in 2020.
Data from the World Gold Council shows that global gold ETF inflows hit $64 billion for the year. September alone saw a record monthly inflow of $17.3 billion, a complete reversal of the trend from the previous four years, which saw combined outflows of $23 billion.
Rukaya Ibrahim, a commodity analyst at BCA Research, calculated that assets in global gold ETFs now represent 2.6% of total assets, up from 1.9% last year.
She stressed that "institutional investor interest is just getting started," describing the rise in investor attention as unprecedented.
Why the Gold Rush?
Many investors are becoming increasingly cautious about the high valuations in the equity market. They view gold as a safe-haven asset offering protection against uncertainties in economic policy and geopolitics.
Figures from LSEG indicate the price of bullion has shot up by 51% this year—its sharpest increase since 1979.
Thierry Wizman of the Macquarie Group suggested gold is being used as a "hedge" in case the anticipated growth from AI-driven technology fails to materialise.
Meanwhile, David Schlesser from VanEck observed that gold and Bitcoin are rising in tandem, arguing that both are "decentralised assets not tied to any government."
This characteristic is particularly appealing to investors seeking alternatives outside the established financial system.
Analyst Outlook and Institutional Backing
Despite the sharp rise, Schlesser cautioned that no asset price moves in a straight line, and investors should be prepared for potential pullbacks and volatility, which he views as a buying opportunity.
He recommended allocating at least 5% of a portfolio to gold and projected the price could exceed $5,000 per ounce by 2026.
Major financial institutions are increasingly endorsing gold ownership, further stimulating market interest:
Goldman Sachs expects gold ETF holdings across North America and Europe to continue growing through to 2026, a trend primarily underpinned by the likely interest rate cuts from the US Federal Reserve.
Morgan Stanley’s Chief Investment Officer, Mike Wilson, has gone further, advising up to a 20% portfolio allocation to gold to protect against persistent inflation.
Adrian Ash from BullionVault concluded: "When big, reputable firms like Morgan Stanley say investors are under-allocated to gold, it's little wonder we are seeing investment flow into gold ETFs and physical bullion alike."
