Gold trends bullish as investor demand rebounds

Off the back of a strong first quarter (Q1) price rally and robust ETF inflows, State Street Global Advisors is seeing an increased trend towards a gold price surge, potentially hitting a record high price of up to US$3,400 (AU$5,420)/ounce this year. 

As at 3 April, gold is up nearly 12% in the quarter, hitting US$3,156 (AU$5,037)/ounce.

State Street’s 2025 base case gold price – with a 50% probability – ranges between $2,800-3,100/oz, with “meaningful profit-taking and liquidation at some point in 2Q/3Q”.

However, the firm leans “structurally bullish” on gold over a six to nine-month horizon as investors look to safe haven assets in response to “rising US recession [or] stagflation risks, prevailing geopolitical uncertainty, ongoing emerging market central bank purchases, and a tight physical environment”.

State Street’s “bull case” ranges between $3,100-3,400/oz, with a 10 percentage point increase in the probability of this higher-price scenario to 40%.

The bear case, a 10% probability, has been adjusted to $2,500-2,800/oz.

According to State Street, a bear run would require a sharp reversal in consumer and risk sentiment and a return to US growth exceptionalism as well as, higher policy rates, and the US dollar trending towards 2022 cyclical highs.

As well, the firm’s analysts note potential fatigue in China with record price levels, with retail gold imports much weaker-than-expected in January-February.

“Given the importance of post-pandemic Chinese consumer demand recovery in supporting gold markets during 2023-2024, this is a bearish signpost worth monitoring.”

Overall, 1Q’25 world gold ETF net inflows totalled around 155 tonnes, with buying activity comparing favourably to 4Q’24 net redemptions of 12 tonnes and 1Q’24 net outflows of over 106 tonnes.

“Recent growth in gold ETF volumes, led by US investors and Western financial players for the first time since 2020, points to renewed macro interest in gold portfolio allocations and macro tail hedges,” State Street wrote.

It notes that the rolling three-month trend of global gold ETF inflows over 1Q’25 “was the strongest since April 2022 and the early weeks of the Russia/Ukraine war”.

“Physically backed gold ETF investors reversing a 3.5-year de-stocking cycle and starting to add to gold holdings is a bullish development that can materially tighten supply/demand balances. In economic terms, the transition from ETF selling to ETF buying is an aggregate demand shock for the gold consumption curve.”

However, despite the strong showing for inflows over the quarter, total gold ETF tonnage is still down more than 20% from the all-time peak in October 2020.

“Under the proper market conditions, this implies plenty of scope for inflows to expand through 2025.”