While global markets have seen wild swings in recent weeks thanks to geopolitical and economic uncertainty, gold has reached new highs as investors seek refuge in the traditional safe-haven asset.
Spot gold hit a record high this week, topping US$3,300 per ounce. It’s risen more than 20% this year due to strong central bank buying, investor demand for gold bullion ETFs and trade war tensions, among other factors.
“We are watching to see how the economy reacts to tariffs, but the reality is that that’s going to take a bit of time,” said Nawojka Wachowiak, a senior portfolio manager with Ninepoint Partners in Toronto, who has experience working and investing in the mining sector.
“In the meantime, gold is very much being used as a safety haven and really a place to hide because of this huge amount of uncertainty.”
What’s driving the rally?
The current gold rally has been going since 2024, driven by inflation concerns, central bank easing and geopolitical uncertainty, Wachowiak said.
But one of the main differences between this and previous rallies is that central banks are “aggressively” buying the metal, she said. Global central banks purchased more than 1,000 metric tons of gold for the third year in a row in 2024, according to a report from the World Gold Council.
“The scope of the volume of what they’re buying is quite staggering,” Wachowiak said, noting central banks purchased twice as much gold as the combined annual production of Barrick Gold Corp., Newmont Corp. and Agnico Eagle Mines Ltd., North America’s largest producers.
There has also been renewed interest this year in gold bullion ETFs, after they posted global net outflows in 2024.
“Those Western investors that typically play a big part in the rally in gold and gold equities were more or less absent last year, and then thankfully, have stepped back into the market in 2025” through gold equity or gold bullion ETF buying, Wachowiak said.
Emerging markets, including China, are also driving the bounce back.
Ultimately, investors are flocking to gold as a hedge against uncertainty, which is at a high as U.S. President Donald Trump’s trade policies shake markets and trigger recession fears.
“We see a lot of rhetoric now about continuing to have economic uncertainty going forward with these tariffs — stagnation, stagflation and just general economic instability. It’s creating a situation where gold is continuing to be used that way,” Wachowiak said.
Nimar Bangash, CEO of Toronto-based Obsiido Alternative Investments Inc., agreed, saying that gold is globally recognized as an asset that can retain value during periods of uncertainty.
“There is a flight to safe-haven assets. And in these types of periods, physical assets, things that inherently function and store value, … there is sudden interest or a surge of interest in those types of investments,” Bangash said.
Opportunities in 2025
Gold can also be used as a portfolio diversifier, as it tends to have low correlation with stocks and bonds, Wachowiak said, adding that the price of gold has been relatively steady, even though there’s been a massive sell-off in the broader public markets.
She suggested that maintaining a 5 – 15% holding in precious metals, including gold, throughout market cycles can “alleviate some of that volatility and risk.”
Bangash, however, noted that in a normal market environment, where markets are less volatile month over month, “gold is perhaps less useful as a day-to-day hedge.”
“But for these types of … black swan events, gold has a strong role to play,” he said.
Between investing in physical gold, gold bullion ETFs and gold stocks, Wachowiak said the main opportunity she sees now is in gold stocks because, “in our view, they have a better risk reward.”
She noted that while gold companies “didn’t really perform” in 2024, they’re now taking advantage of the higher price of gold and their costs have stabilized, setting them up for a rebound.
“What we’re seeing in those gold equities is really quite a lot of margin expansion and free cash flow, … and this level of free cash flow generation is not typical for the sector,” she explained.
“I think what we’re going to continue to see in 2025 is an increase in capital returns in the form of dividends, but perhaps even more importantly, [company share] buybacks, because these stocks are still very good value, and they’re cheap relative to the underlying commodity.”
Wachowiak also said she sees value throughout the entire gold sector, including explorers, developers and producers, rather than just the largest companies in the sector by market capitalization.
Other diversification opportunities
Bangash said physical and tangible assets in private markets, such as infrastructure and farmland investments, offer another diversification opportunity for investors, as they have been “historically resilient in market dropdowns.” He also suggested that pockets of the private credit market could present an opportunity as many private companies right now “may need working capital, they may need bridge loans.”
However, he acknowledged that investing in private markets is not suitable for everyone.
“It’s very much a client suitability decision on whether it makes sense,” Bangash said.
“There are parts of private markets that I believe are accretive in all kinds of market environments. And if it makes sense for your clients and they can withstand illiquidity, it may be a place to allocate capital on a long-term, strategic basis.”
Asked what he thinks is the best hedge against inflation or uncertainty, Bangash said it’s “difficult to pinpoint” because even U.S. government bonds, usually a go-to safe haven in uncertain times, have seen volatility recently.
“So, I would say the best strategy is to have a process, have a strategic asset mix, have a long-term view on different asset classes, and put together enough things that your portfolio is resilient, come whatever the next thing may be,” he said.
Given the ongoing geopolitical and economic uncertainty, demand out of emerging markets, strong central bank buying and shifts in monetary policy, Wachowiak sees 2025 as being a strong year for the yellow metal.
“All of those drivers, in our view, have created a situation where gold is set up for a performance, not just in the short term, but medium to long term as well. So, we are very positive.”
Bangash, on the other hand, said while he and his firm don’t necessarily allocate to physical gold or gold-based funds, “we certainly appreciate that allocation to gold in a portfolio could have a role to play, especially right now.”