At the start of 2020, whereas international markets had been shaking underneath the load of the Covid-19 pandemic, the well-known American investor Ray Dalio, founding father of Bridgewater Associates, the most important hedge fund on the planet, made the choice to extend gold allocations in his funding portfolio.
This step was thought of controversial by many, as this enhance got here on the expense of shares and bonds, at a time when the markets had been declining because of the outbreak of the pandemic, however “Dalio” was then betting on a powerful rise within the yellow metallic.
Dalio expressed this pattern, saying his well-known phrase: “He who doesn’t have gold doesn’t know how you can defend himself from monetary stupidity.” He additionally emphasised in lots of media interviews that gold is without doubt one of the most vital property for hedging in opposition to “the stupidity of monetary and financial insurance policies.”
Certainly, the worth of gold rose from roughly US$1,500 per ounce in January 2020 to greater than US$2,000 in August 2020 (a rise of 33%), coinciding with mounting fears of financial collapse.
That second was the golden age for the yellow metallic. Whereas shares and bonds collapsed, the worth of the yellow metallic recorded large will increase inside months, and gold traded funds started receiving billions of {dollars} from traders trying to find security.
At present, a number of years after that wave, and with growing fears of a slowdown within the international economic system, and the return of central banks to financial easing insurance policies, gold ETFs are in demand once more.
This turnout raised a basic query: Are gold funds actually residing their finest instances, or would possibly their luster fade within the close to future?
In line with the World Gold Council, holdings of world gold funds in September 2024 rose by 46 tons to achieve 3,226 tons, the most important month-to-month enhance in additional than two years, pushed by increased institutional demand and growing bets on a lower in US rates of interest.
Why are traders returning to gold?
Because the outbreak of the Covid-19 pandemic, by means of the warfare in Ukraine and the escalation of tensions within the Center East, gold has returned to the forefront of the worldwide funding scene as a secure haven that preserves worth in instances of turmoil.
Whereas some inventory and bond markets collapsed, the worth of the yellow metallic rose strongly in 2025, peaking at about US$4,378 per ounce in October, making 2025 one of the crucial affluent years for the metallic..
The good points of the yellow metallic’s rise weren’t restricted to particular person traders, as gold traded funds had been capable of document large month-to-month flows amounting to about 26 billion US {dollars} in September 2025, making the third quarter of the yr the best ever within the historical past of those funds..
This demand will not be solely resulting from geopolitical dangers, but in addition to structural components corresponding to inflation hedging and the weak spot of the greenback, in addition to the growing demand from central banks for gold as a strategic reserve.
Thus, gold is not only a momentary protecting instrument, however has turn into a pivotal ingredient within the technique of traders and nations alike.
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The 5 largest nations with reserves held by their central banks (in response to knowledge from the Gold Council). 2024)
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Rating
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State
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Gold reserves (metric tons)
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1
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USA
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8133
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2
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Germany
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3350
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3
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Italy
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2452
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4
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France
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2437
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5
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China
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2279
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As client costs rose and the worth of the dollar declined from its highest ranges in 2022, traders turned to gold as a defend that protects wealth from the erosion of buying energy.
Morningstar knowledge reveals that the yellow metallic outperformed main US inventory indices during times of excessive inflation between 2021 and 2024, attaining a mean annual return of roughly 9% in comparison with solely about 5% for the S&P 500 index.
The return to gold was not restricted to particular person and institutional traders, however moderately prolonged to central banks, which intensified their purchases in an unprecedented method through the previous two years.
In line with the World Gold Council, central financial institution purchases amounted to greater than 1,100 tons of gold in 2024, which is the second highest quantity recorded in trendy historical past after 2022.
China, Turkey and India topped the checklist of consumers, in a transfer that displays an growing want amongst rising economies to diversify their reserves away from the greenback in an more and more unsure and risky world.
Gold funds versus funding options
Whereas international inventory markets witnessed clear volatility throughout 2024 and 2025, gold maintained its luster as a secure funding haven.
Whereas the MSCI World Markets Index fell by practically 3.1% within the first half of 2025 resulting from slower progress and better borrowing prices, gold ETFs achieved a constructive return of greater than 8% in the identical interval.
This efficiency makes it a most well-liked alternative for traders in search of stability amid market turmoil.
Then again, authorities bonds misplaced their conventional attraction because of the continuation of excessive curiosity insurance policies in the USA and Europe, which put strain on their market values.
As for fund administration methods, the character of investing in gold has developed past merely monitoring the worth of an oz..
ETFs corresponding to iShares Gold Belief and SPDR GoldShares continued to draw inflows by monitoring the spot value, whereas energetic funds took a unique strategy by investing in gold mining firms to profit from their working earnings..
The Van Eck Gold Miners ETF, which incorporates firms corresponding to Newmount and Barrick Gold, posted an annual return of 13.8% in 2024, supported by rising gold costs and mining shares, in response to Refinitiv knowledge.
This momentum was not restricted to monetary establishments, as BlackRock knowledge revealed that the variety of particular person traders who personal shares in gold funds elevated by 22% in 2024 in comparison with the earlier yr.
This shift within the habits of particular person traders contributed to growing the depth of the gold funds market, and made it a serious funding class in its personal proper, not only a momentary hedging instrument.
At a time when many conventional property have declined resulting from financial uncertainty, gold funds are on an upward pattern pushed by the continued demand for monetary safety, growing geopolitical uncertainty, and the expansion of gold as a strategic asset for central banks and traders alike.
Will the golden age of gold funds proceed?
As gold continues to draw traders by means of 2025, questions are rising about whether or not this golden age for gold funds will proceed or is a brief section.
To reply these questions, it should be famous that one of many major components which will help the yellow metallic and its funding funds is the chance that the US Federal Reserve will proceed to cut back rates of interest.
After the US Federal Reserve started regularly reducing rates of interest this yr, investor curiosity in gold elevated, as low rates of interest often cut back the attractiveness of yield-generating property and improve demand for actual property such because the yellow metallic.
At a time when the geopolitical issue continues to play a pivotal position in supporting the demand for gold, conflicts proceed in Ukraine and the Center East, amid escalating tensions between China and the USA, which reinforces funding flows in gold funds through the present yr.
World Gold Council knowledge till November 2025 point out that purchases of gold funds by central banks, particular person and institutional traders have recorded a big enhance of greater than 12% in comparison with the identical interval in 2024.
Regardless of this momentum, gold funds face challenges to future progress, the primary of which is growing competitors from digital property corresponding to Bitcoin, which some traders contemplate digital gold resulting from its properties of safety in opposition to inflation and restricted shortage.
Excessive fund administration prices and value fluctuations might restrict the speed of latest investor inflows, particularly if inventory and bond markets stabilize considerably within the coming months..
In mild of those knowledge, it seems that gold funding funds are certainly experiencing a golden period, however the sustainability of this golden period will depend upon the trail of world financial coverage, the velocity of the economic system’s restoration, and the metallic’s capacity to compete in entrance of latest property competing for the title of “secure haven.”
Sources: Figures – World Gold Council web site – Bloomberg – Morning Star – Van Eck Annual Report – Morgan Stanley – BlackRock – Reuters – CNBC – Refinitiv
