In the Spotlight Trend of the Month
In March, gold hit a new milestone.
For the first time ever, its price rose above $3,100 per ounce. The ascent to this historic price level is quite remarkable given that a year ago, gold prices were much lower at around $2,200 per ounce. So, what is it that’s driving the precious metal sharply higher right now?
Geopolitical uncertainty
In recent months, there have been several factors that have boosted the gold price. One is geopolitical uncertainty. The world stage is rarely static, but the last few months have seen a particularly rapid and unsettling shift in geopolitical dynamics. From US President Donald Trump’s stance on Ukraine to the growing tension between China and Taiwan, there have been many issues creating fear and uncertainty. In moments like these, gold tends to see high demand from investors. That’s because it has traditionally been viewed as a “safe-haven” asset.
The global trade war
Also fuelling demand has been the global trade war. This year, the US has slapped tariffs on goods from Canada, China, Europe and Mexico, and in many cases, seen retaliatory tariffs applied back. This has created uncertainty for investors as it has become harder to accurately forecast companies’ near-term earnings. Tariffs can also lead to higher inflation (which tends to benefit gold as the commodity is often viewed as an inflation hedge). Analysts expect this issue to support gold prices. And they see Donald Trump’s plan to impose further tariffs as a factor that could spur ongoing safe-haven demand across markets.
High demand from China
Demand from China has been another key factor accounting for the price rise. Given the friction between the US and China, China’s central bank has been buying gold and selling down its holding in US Treasuries in an effort to diversify its reserves and become less dependent on the US and the US dollar (China is the second-largest holder of US Treasuries after Japan). In February, it reported the purchase of five tons of the precious metal — the fourth consecutive month of gold reserve increases. At the end of February, China’s official gold holdings stood at 2,290 tons — the highest on record — accounting for 5.9% of total foreign exchange reserves. But it’s not just the central bank in China that has been buying gold lately — individual investors have been buying too. In February, Chinese gold ETFs saw inflows of RMB14bn (approx. USD $1.9bn) — the largest ever monthly inflow — according to the World Gold Council (WGC).
Increased institutional trading activity
One other issue that is worth highlighting is that a significant price disparity has emerged between the physical gold markets in London and New York recently. Specifically, gold prices in New York have been consistently higher than those in London — with premiums reaching up to $60 per ounce — due to concerns that Donald Trump could impose tariffs on gold. This discrepancy has created lucrative arbitrage opportunities, prompting banks and institutional investors to physically transport gold from London to New York to capitalise on the price differences. This has created a backlog to withdraw gold from the Bank of England (which holds bullion on behalf of central banks and commercial banks) and a liquidity crisis in the London bullion market.
Bullish forecasts
Looking ahead, many analysts expect gold prices to continue rising. Recently, analysts at Goldman Sachs raised their end-2025 gold price forecast to $3,300 per ounce from $3,100, citing stronger-than-expected ETF inflows and sustained central bank demand. The investment bank expects large Asian central banks to continue their aggressive gold purchases for the next three to six years, aiming to reach projected gold reserve targets. Other banks that have reaffirmed their bullish stances on the commodity lately include Citigroup, UBS, and Bank of America, the latter stating that prices could hit $3,500 within the next two years if investment demand increases by 10%.
Gaining exposure to gold
There are many ways to invest in gold today. Options include buying physical gold, gold futures, a spot ETF (that is based on futures contracts), a physical gold ETF or fund that owns gold (these saw strong inflows in 2024), and investing in gold miners. Each approach has its pros and cons. Therefore, it can be smart to take a diversified approach to the commodity.
Those looking for portfolio exposure to gold may wish to check out eToro’s GoldWorldWide Smart Portfolio, which provides access to both gold ETFs and gold mining stocks. Another option to consider is the WisdomTree-Comm Smart Portfolio, which covers a range of commodities and has a tactical allocation to specific assets such as gold.
