Gold's Price Surge Sparks Shift in Portfolio Allocations
Gold's price surge in 2025 marked its strongest single year since 1979, outperforming major US dollar-denominated assets. Despite this, gold fund holdings worldwide account for less than 1% of total global exchange-traded fund and mutual fund assets.
Aakash Doshi, Global Head of Gold Strategy at State Street Investment Management, attributes the gap between gold's performance and adoption to a growing structural environment that reinforces its potential utility. He points to government stimulus in 2020, which collided with a global recession and resulted in record debt-to-GDP ratios.
The downstream effect on purchasing power is what gold has historically been designed to absorb. Doshi explains that alternative fiat assets like gold are protecting investors' purchasing power due to the issuance of sovereign debt. Inflation and changes in stock-bond correlations have also contributed to gold's momentum.
Central bank demand adds another layer, with institutions accelerating gold purchases following the 2022 Russian invasion of Ukraine. This buying is driven by geoeconomic and geostrategic reasons rather than alpha generation, making central banks price-inelastic buyers.