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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Where to find investment outperformance in 2025? Defence stocks, Chinese internet companies and Warren Buffett’s Berkshire Hathaway have all beaten the market. But when the flight to safety is on, gold still gleams.
The precious metal has broken through $3,000 per troy ounce, just as it breached $2,000 during the financial crisis of 2008 and $1,000 in the pandemic 12 years later. It is unlikely to lose its lustre any time soon. It is the ultimate shock absorber: against geopolitical maelstroms, inflation and — as a non-yielding asset — lower interest rates.
This trio of latter-day horsemen is galloping across the horizon. Natural orders are being ripped apart as US President Donald Trump toys with ideas like modern-day colonisation, civil-service defenestration and swingeing tariffs. The latter could well tip the US into recession. Since November’s election US gold stockpiles have more than doubled.
Sure, that particular trip will slow as vaults fill; but trust in gold as a stable store of value endures, able to hold its own as currencies and capital markets lurch. Analysts scurried to revise forecasts upwards last month and are already doing so again. Goldman Sachs is looking at $3,100 by the year-end; other shops see it getting there in a few months.
A broad church of buyers is doing lots of heavy lifting. Central banks, buying more than 1,000 tonnes in each of the past three years, are piling in. Those in emerging markets have long been following their wealthier peers in shovelling gold into reserves, diversifying from US dollar holdings.
Investors last year overtook central banks, buying 1,180 tonnes, mainly in bars and coins. But exchange traded funds physically backed by gold reversed course this year, staunching three years of outflows to pull in $9.4bn last month.
Keep an eye too on potential newcomers from Chinese insurance companies and US mutual funds. Beijing last month unveiled a pilot project allowing 10 insurance companies to buy gold. In the US, tax changes proposed in a bill put forward last Friday could, if passed into law, divert a few basis points of the tens of trillions of mutual funds’ dollars under management into gold.
Goldbugs are a jittery band but history proves them right. Over a deck of periods — one, three or 10 years say — gold returns have trumped those of other asset classes. Bullion has delivered annual returns of 8 per cent since the gold standard was abandoned in 1971, says the World Gold Council.
Even an asset designed to mitigate risks carries some of its own, not least that the future turns out rather less risky than supposed. At least Rheinmetall, Alibaba and Berkshire Hathaway promise future cash flows, which gold does not. But when new shocks come almost daily, shock absorbers rule supreme.
louise.lucas@ft.com
https://www.ft.com/content/aee54136-b145-44dd-af3e-d4c1fc486122
