Gold smashes records in 2025 — outpacing stocks, bonds, bitcoin: UBS warns investors — are we on the brink of a historic surge?

Economic Times

2 hours ago

Gold is dominating 2025. Outpacing stocks, bonds, and even Bitcoin, it has delivered a 28% gain so far this year. Investors are taking notice, and UBS has raised its forecast, predicting prices could hit $3,600 by March 2026 and $3,700 by mid-year. Surging demand from ETFs and central banks is driving this rally, pushing global gold consumption to its highest level since 2011.
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Why Gold is Outperforming other assets
Inflation Concerns in the U.S.: Persistent inflationary pressures have eroded the appeal of cash and fixed-income instruments, prompting investors to seek a safe haven.
Persistent inflationary pressures have eroded the appeal of cash and fixed-income instruments, prompting investors to seek a safe haven. Geopolitical Uncertainty: Rising tensions in global hotspots are fueling demand for gold as a risk hedge.
Rising tensions in global hotspots are fueling demand for gold as a risk hedge. Fiscal Policy Volatility: Markets are cautious about potential changes in U.S. fiscal policy, increasing appetite for assets that preserve value.
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Record Demand from ETFs and Central Banks
ETFs: Inflows during the first half of 2025 have reached levels not seen since 2010, indicating that both retail and institutional investors are piling into gold.
Inflows during the first half of 2025 have reached levels not seen since 2010, indicating that both retail and institutional investors are piling into gold. Central Banks: Many governments are increasing gold reserves to diversify holdings and hedge against currency risk.
UBS Forecasts Gold to Hit Record Highs
Implications for the Broader Market
Diversification Becomes Critical: With equities and crypto markets experiencing volatility, gold's consistent gains reinforce its role as a hedge.
With equities and crypto markets experiencing volatility, gold's consistent gains reinforce its role as a hedge. Investor Sentiment: The rush toward gold reflects cautious optimism. Markets are rewarding assets that provide both safety and liquidity.
The rush toward gold reflects cautious optimism. Markets are rewarding assets that provide both safety and liquidity. Global Economic Signals: Central bank buying and ETF inflows suggest confidence in gold as a strategic asset amid uncertain monetary policy environments.
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Gold Futures and Influences
How to Gain Gold Exposure Through ETFs
Gold as a Strategic Hedge
Global Implications and Market Sentiment
Short-Term Volatility: Prices can fluctuate based on U.S. dollar strength, Federal Reserve announcements, and geopolitical developments.
ETF vs Physical Gold: ETFs offer ease of trading but carry management costs; physical gold requires secure storage and insurance.
Portfolio Balance: Financial advisors recommend tailoring gold exposure to individual goals, typically as 5–15% of a diversified portfolio.
Implications for Investors
FAQs:
Gold has emerged as the standout performer of 2025, delivering a remarkable 28% year-to-date gain. This surge has left traditional assets like stocks and bonds trailing, while even high-profile alternatives such as Bitcoin have struggled to keep pace.Investors are paying attention, and UBS Global Wealth Management has updated its forecast, projecting gold prices to hitAnalysts note that central banks' continued buying and record inflows into gold-backed ETFs have further fueled demand, signaling that the metal's rally may have staying power well into 2026.Several factors are driving gold's exceptional performance this year:Unlike stocks, which are sensitive to corporate earnings, or bonds, which are influenced by interest rates, gold offers a non-yielding yet highly liquid alternative that investors turn to in uncertain times.The strength of the rally is further supported by tangible demand. Exchange-traded funds (ETFs) and central banks are buying aggressively:These purchases have pushed, the highest level since 2011. This combination of investor interest and central bank accumulation creates a strong foundation for continued price growth.UBS Global Wealth Management has significantly revised its gold price outlook, projecting $3,600 per ounce by March 2026 and $3,700 by mid-2026. The bank cites a combination of macroeconomic pressures, including persistent U.S. inflation, geopolitical tensions, and questions surrounding Federal Reserve independence and government fiscal strategies.'Gold remains a hedge against uncertainty,' UBS analysts noted. Their bullish stance reflects confidence in both physical demand and financial-market appetite for the metal. The firm's revised forecasts underscore the idea that gold is increasingly seen as a strategic asset for portfolio protection rather than merely a commodity investment.Financial experts suggest ETFs likeandoffer convenient access without the complexities of storage or security.As of mid-August 2025, GLD trades at $305.39, while IAU sits at $62.53. Investors should consider factors such as management fees and tracking differences relative to spot prices when selecting their preferred instruments.Gold's 2025 performance highlights broader market dynamics:In the U.S., December gold futures recently settled at $3,378 per ounce. Analysts note that short-term price fluctuations may occur due to the stronger dollar and political developments, including President Donald Trump's meetings with Ukrainian and European leaders.For investors, understanding these dynamics is crucial. Even as prices climb, geopolitical news and currency strength can create temporary volatility. Monitoring macroeconomic indicators such as inflation reports, Federal Reserve statements, and international trade developments is essential for anticipating gold price movements.For those seeking gold investment without buying physical bullion, ETFs remain a practical option. Popular choices include SPDR Gold Shares (GLD) and iShares Gold Trust (IAU), which currently trade at $305.55 and $62.55 per share, respectively.Investors should weigh factors like management fees and tracking error against the spot price of gold. These instruments offer liquidity and accessibility, making them attractive for portfolio diversification.Additionally, ETFs can be easily incorporated into retirement accounts or broader investment portfolios, allowing for strategic allocation to gold without the complexities of storage and insurance.Beyond price gains, gold offers long-term strategic value for investors seeking protection against systemic risks. Its historical performance during periods of inflation, currency depreciation, or market crises reinforces its reputation as a reliable store of value.Wealth managers increasingly advise incorporating gold as a percentage of a diversified portfolio to reduce overall risk exposure and enhance stability during periods of economic uncertainty.The strong global demand for gold is also influencing mining companies and production strategies. Higher prices encourage exploration and extraction, potentially reshaping supply dynamics over the next few years. Meanwhile, investor sentiment suggests that gold's popularity will continue to grow as concerns over monetary policy, geopolitical instability, and economic uncertainty persist worldwide.While gold is trending, caution is essential:UBS's bullish forecast, combined with record ETF inflows and central bank buying, signals a sustained upward trajectory for gold. Investors may view the metal as a defensive asset amid rising inflation, fiscal uncertainty, and geopolitical friction.While short-term swings are possible, the broader trend indicates that gold remains a compelling store of value and hedge against market turbulence. Investors should consider both direct investment and ETF exposure, tailoring allocations to risk tolerance and long-term financial goals.UBS expects gold to reach $3,600 by March 2026 and $3,700 by mid-2026 due to inflation and global uncertainties.ETFs like SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) let investors buy gold easily without holding physical bullion.