It’s the boom that keeps getting boomier. After a stellar 2024, gold continues to reach new highs, advancing by about 14 per cent over the past month alone, and up over 60 per cent on the previous 12 months, to break through the $4,000-per-ounce threshold.
According to the World Gold Council, as of October 8th, gold had already hit 45 all-time highs so far this year.
Unsurprisingly then, investors have been pouring into the precious metal. Last month, Bank of America said purchases of gold ETFs increased by 880 per cent, with an all-time high of $14 billion flowing into the asset, and physical purchases also growing strongly.
In the UK, you can now buy gold in Costco; yes, you can pop a 500g gold bar (about £49,000) into your (online) trolley along with your 30 bars of Kinder Bueno, kilo of coffee and 24 cans of Fanta Pear.
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No wonder, then, that some are questioning whether the current boom might in fact be a bubble. Alan McIntosh, chief investment officer for Quilter Cheviot Europe, describes recent price hikes as “insane”.
“It is getting a little bit crazy,” he says. “It’s pretty phenomenal: we haven’t had moves like that for decades”.
What’s unusual for McIntosh is that the so-called safe-harbour asset is reaching new highs at the same time as the possible AI bubble.
“Both of these things seem to be contradicting each other and both seem to be going up at the same time,” says McIntosh.
What’s happening?
The recent stratospheric rise in the price of gold is not a new event; it reached record highs last year, but the rate of growth this year has substantially picked up again.
“When bad things happen, people tend to move into gold,” says McIntosh. This is as true today as it has always been, perhaps, but what has been different this year is the new leadership in the US.
“A lot of the move this year has been around what Donald Trump has being doing,” says McIntosh, pointing to never-ending government borrowing, trade tariffs, federal shutdown and a devaluing dollar, as well as broader geopolitical risks.
“There is a greater threat over the perception of the dollar as being the safest currency,” says McIntosh. “It used to be that the dollar was the safe haven but now people are distrustful of that.”
Further interest rate cuts are expected in the US, which will support gold prices. Central banks have also been buying heavily into gold, particularly in developing countries, spooked perhaps by Trump’s trade tariffs.
“Banks have been swapping paper money for something that’s real,” says McIntosh, adding that this can protect against the dollar weakening further.
But it’s unlikely to be all driven by fundamentals; the fear of missing out can also push people to buy gold. As McIntosh says, some people are suddenly realising that gold is up by more than 50 per cent over the past year, “so there must be something in it. That, often of itself, can prompt a lot of buying”.
An analyst at Pictet Asset Management likened current exuberance to “gold-plated Fomo”. “Gold has become so big ... that you cannot ignore it. There becomes a level when it becomes impossible not to own it,” Luca Paolini told the Financial Times.
Even our own Central Bank has doubled its holdings of gold in recent years to about 12 tonnes, and has seen the value of this soar. It was worth about €1.13 billion as of this August, up from €879 million a year earlier.
Frothy exuberance
But are we approaching bubble territory?
“Hard to say,” says McIntosh, though he concedes that growth over the past year is “ridiculous” for an asset that doesn’t yield anything.
“It is a kind of exuberance, but the reasons people are buying are perfectly legitimate. It’s a hedge against bad stuff happening,” says McIntosh.
And it may not stop here. Strategists at Bank of America and Goldman Sachs are forecasting a price of $5,000 an ounce next year, while Ray Dalio of Bridgewater Associates, one of the world’s largest hedge funds, said in early October that investors should now hold 15 per cent of their portfolio in gold.
This is a view echoed by Morgan Stanley. The US bulge bracket bank suggested last month that part of the bond allocation of a typical portfolio should be replaced with gold. Farewell the 60/40 portfolio – hello 60 per cent equities, 20 per cent bonds, and 20 per cent gold.
This is partly due to bonds no longer being seen as the safe haven they used to be.
Such pronouncements can shore up demand for gold – and continue the price rise. “This will undoubtedly squeeze the price higher,” says McIntosh.
US monetary policy may also support a high level of gold, with expectations of further rate cuts intensifying.
And the supply of gold has its limits. It’s said that the current supply of gold would fill only three Olympic-sized swimming pools. It doesn’t take much extra demand to squeeze the price higher.
But while the current rush might run for another six or 12 months, McIntosh says it will probably “fall over” at some point. “It’s looking a little bit frothy,” he says. “Personally, I don’t think I’d be buying at $4,000.”
And there is always the risk of coming to an idea too late in the day. “People who get on the train just before it leaves the station are most likely to lose their money,” says McIntosh
[ Are we overegging the threat from US tariffs?Opens in new window ]
Gold: Three ways to invest
Gold coins: You can buy gold coins and bars with Goldcore, the Dublin-based member of the London Bullion Market Association. You can either have it delivered to you by a secure and insured courier or have Goldcore store it for you in its vault. A 1oz gold bar was selling for €3,762.38 on October 15th, while a 0.24oz British gold sovereign coin was trading at €901.21.
Goldcore says Dublin buyers tend to keep their gold in storage, but Cork buyers prefer to take delivery. Factor in buying related/storage costs with this option.
You can buy a 1/4 troy ounce gold coin, commemorating Daniel O’Connell, for €995 from the Central Bank.
ETF/ETC: Another option is to put your money into an exchange-traded fund (ETF) or exchange-traded commodity fund (ETC). Many of these are backed by physical gold and they are a relatively cheap, liquid way of getting into gold.
One example is the iShares Physical Gold ETC, which was up 57 per cent in the year to October 15th. It has a 0.12 per cent annual fee and you can buy such funds through your broker.
Revolut also offers customers the option of trading an “exposure” to gold, which is based on live market performance data. A spokesman says this exposure is backed up by real, physical gold. Gains are subject to capital gains tax. Standard customers will pay fees of 0.99 per cent/min fee of €1, whichever is higher, plus 1 per cent/0.5 per cent FX fair usage.
Shares in gold miners: Another option is to buy shares of gold mining companies, such as Zijin Mining Group or Newmont. This is a more indirect way of getting exposure to gold, and can be more volatile, given the difficult environments some of these companies operate in.
“It’s a very risky way of doing it,” says McIntosh.
Or what about the Johannesburg Stock Exchange? The JSE FTSE, which has a number of gold mining companies in the index, is up 30 per cent on the year.
