Market Update 16th June 2025

Worth its weight in gold

Gold has had a significant rally over the past few years. It is often used in portfolios as a diversifier, a hedge against inflation (and more recently against US dollar depreciation), and as a safe haven asset. How investors have accessed the precious metal will have impacted the performance of their portfolios. The two main ways are through bullion or miners.

The gold rally has somewhat stemmed from central banks around the world adding to their gold reserves. Gold currently accounts for 18% of global reserves. The World Gold Council data indicates that central banks added 1,082 tonnes of gold in 2022 (the largest year on record), 1,037 tonnes in 2023, and 1,044 tonnes in 2024. In a 2024 survey by the World Gold Council, it reported that “70% of central banks plan to increase gold reserves over the next 5 years”.

This is an unprecedented buying of gold, and this demand pressure has helped the gold price rally. The increase in gold reserves can be seen as an increase in the need for safe haven assets. Especially if de-dollarisation and US dollar depreciation continues. The increase in gold reserves since 2022 is partly driven by the weaponisation of the dollar against Russia, leading many countries to increase their non-dollar reserves.

Gold has also been on a certain president’s mind. US President Donald Trump posted on X in April a quote which said “He who has the gold makes the rules”. The US government holds around 8,135 tonnes of gold as at the end of 2024. The US values this on the balance sheet at around $11billion, as it is valued at $42.22/oz. The gold price is significantly higher and if the US revalued it based on current prices it would be over $750billion.

The $42.22 valuation of gold dates back to the Bretton Woods period and hasn’t changed legally since then so has never reflected market prices of gold on the US balance sheet. There are risks to the revaluing of gold for the US on the balance sheet, for example it could impact dollar confidence which is already weakened. Also it wouldn’t actually help the US debt problem it would just be a paper gain on the balance sheet unless the government chose to monetise it (which Scott Bessent, the US Secretary of the Treasury, did hint at when he said “within the next 12 months we are going to monetise the asset side of the balance sheet”. What he exactly meant by that is a debate for another day).

The 2025 US dollar weakening has impacted spot price trackers. Mostly gold is quoted in oz/USD, so a dollar weakening means quoted gold price increases. A recent JP Morgan note has estimated that the gold price will reach $4,000/oz by Q2 2026, the current highest record gold price is $3,500.05/oz which was in April 2025. There are many ETFs which track the gold price so investors in those will have done well. There are also ETFs which are physical gold ETFs, meaning they are backed by the physical gold amount equivalent to the size of the fund. An ECB article¹ stated “exposures in the euro area to gold through exchange-traded funds (ETFs) amounted to €50 billion in the fourth quarter of 2024”.

Similarly in the same article it highlighted the exposure to gold derivatives in the euro-area equalled “€1 trillion in March 2025, an increase of 58% since November 2024.” Nearly 50% of these have a bank counterparty so there are external shock risks.

Another way investors can access gold is through gold miners, which haven’t done as well recently but can lag the gold price. This means gold miners are expected to do well as demand pressures continue. Mining equities are more volatile than owning bullion but can have a higher risk/reward. And although these are equity stocks, some fund managers I’ve spoken to argue that their correlation of performance is less to do with the global stock market and more to do with real rates so can be a good diversifier within portfolios.

In a famous quote JP Morgan said “Gold is money. Everything else is credit”. Gold has been an excellent part of portfolios over the past few years, and I think there is more to come. Gold equities have lagged the price rally but there is scope for that to change as demand outweighs supply.

¹ ECB, Maurizio Michael Habib, https://www.ecb.europa.eu/press/financial-stability-publications/fsr/focus/2025/html/ecb.fsrbox202505_02~7f616fcd3f.en.html

Emily Cave – Research Analyst

Hawksmoor Investment Management Limited is authorised and regulated by the Financial Conduct Authority (www.fca.org.uk) with its registered office at 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter, Devon EX1 3QS. This document does not constitute an offer or invitation to any person in respect of the securities or funds described, nor should its content be interpreted as investment or tax advice for which you should consult your independent financial adviser and or accountant. The information and opinions it contains have been compiled or arrived at from sources believed to be reliable at the time and are given in good faith, but no representation is made as to their accuracy, completeness or correctness. The editorial content is the personal opinion of Emily Cave. Other opinions expressed in this document, whether in general or both on the performance of individual securities and in a wider economic context, represent the views of Hawksmoor at the time of preparation and may be subject to change. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. Currency exchange rates may affect the value of investments. FPC25423