Highest gold demand in nine years

Despite several record highs, gold is more popular in 2025 than it has been since 2016 among institutional and private investors alike. Demand for gold by central banks has also remained unbroken for years – and, according to commodity experts, this is not necessarily set to change in the foreseeable future, as emerging markets in particular hold an average of less than 15 per cent of their foreign currency reserves in gold, i.e. significantly lower gold holdings than many industrialised nations. Moreover, current geopolitical crises and looming trade wars are not the only drivers of the strong global demand.

Bonds currently not much of a portfolio diversification

While 2020 still saw a correlation coefficient of -0.5 between equities and bonds – with weaker stock prices tending to push bond yields upwards and vice versa – the two asset classes are now positively correlated at 0.5. Stocks and government bonds now tend to move in the same direction. The reason for the shift in the stock/bond correlation from negative to positive is rooted in core inflation, which stands at 2.8 per cent in the US and 2.9 per cent in the Eurozone. From a core inflation of 2.5 per cent onwards, the two asset classes usually head in the same direction. Gold, on the other hand, has a negative correlation with stocks and bonds alike in times of crisis, which in turn increases the significance of the precious metal for portfolio diversification.

US-dollar weighed down by US credit rating downgrade

The three major rating agencies Fitch, Standard & Poor’s and, most recently, Moody’s have downgraded US creditworthiness, weakening the US dollar’s appeal to investors. Given the current market volatility, gold serves as a welcome alternative for institutional investors seeking diversification. This development is also reflected in the fact that in addition to physical gold, ETFs and gold-backed ETCs are in high demand in 2025. Year-to-date, US ETFs have grown by 9.3 per cent, European ETCs by 4 per cent and Asian gold funds by almost 46 per cent. Overall, inflows of 20.6 per cent have been offset by outflows of 10.9 per cent in 2025 to date – an increase of 9.6 per cent.