Why are investors running after gold?

gold

 Why are investors running after gold?

Throughout the ages, gold has been a safe haven during times of political and economic instability. Its status as a high-value, reliable commodity, easy to transport and sell anywhere, provides a sense of security in times of turmoil.

Despite its prestigious status as a safe haven, gold is not admired by all investors. One of the most prominent of these is the famous investor Warren Buffett , known for his wisdom in the world of finance and investment. He described gold as a "sterile asset" in a letter he addressed to Berkshire Hathaway shareholders in 2011.

However, contrary to this view, investors have flocked to gold bullion amid the escalating trade war during US President Donald Trump's second term , concerns about the US debt reaching record levels, and growing concerns about the independence of the US Federal Reserve .

According to a report prepared by Bloomberg and reviewed by Sky News Arabia Economy, investors have been flocking to gold-backed exchange-traded funds this year, with their total holdings of the precious metal reaching their highest level in three years in September 2025.

This strong demand led gold to record highs in 2025, continuing the sharp upward trend that began in 2024. During trading on October 2, 2025, gold futures for December delivery surpassed $3,900 per ounce for the first time in history, following US lawmakers' failure to reach an agreement on federal funding , leading to the first government shutdown in nearly seven years.

Why is gold considered a safe haven?

For modern investors, gold is considered a safe haven primarily due to its stability and liquidity, rather than any intrinsic benefit.

Gold has a long history of rising in value during periods of market turmoil and is seen as a hedge against inflation when the purchasing power of currencies erodes.

Gold typically becomes more attractive in a low interest rate environment, and markets reacted positively to the US Federal Reserve's quarter-point interest rate cut on September 17, 2025. However, Trump's continued pressure on the Fed to make further rate cuts has contributed to a rise in bullion prices in anticipation of further monetary easing from the central bank.

Gold's status as a safe haven has also risen as confidence in other safe havens , particularly the US dollar and government bonds, has waned. Gold typically moves inversely to the dollar, and since its price is set in dollars, a decline in the value of the US currency makes it cheaper for holders of other currencies. The US dollar fell to its lowest level in more than three years against other major currencies in mid-September.

Beyond market volatility, gold ownership is deeply rooted in Indian and Chinese culture, two of the world's largest markets for the metal. Jewelry, bullion, and other trinkets are passed down through generations as a symbol of prosperity and security. According to Bloomberg, Indian households own approximately 25,000 metric tons of gold, more than five times the amount stored in Fort Knox, which houses nearly half of the U.S. Treasury's gold reserves.

What drove gold higher before Trump's return?

The massive surge in gold prices dates back to early 2024, before Trump's return to power. This surge was driven by massive purchases by central banks, particularly in emerging markets, seeking to reduce their reliance on the US dollar, the world's primary reserve currency. Gold helps diversify countries' foreign exchange reserves and protects them from currency devaluation.

Central banks have been net buyers of gold for the past fifteen years, but their purchases accelerated after the Russia-Ukraine war. The freezing of Russian Central Bank funds held in their countries by the United States and its allies highlighted the vulnerability of foreign exchange assets to sanctions.

Data from the World Gold Council shows that central banks around the world purchased more than 1,000 tons of bullion in 2024, for the third consecutive year, making them owners of approximately one-fifth of the total gold mined.