Gold investors who plunged funds into the sagfe haven face a test of faith as sharemarkets rebound
Only a month ago the queues forming at the ABC Bullion Australia office in Sydney gained national attention and the level of investor money flowing into gold-based exchange traded funds reached its highest in three years.
Gold investors have been the outstanding winners in recent months, riding a remarkable lift in gold prices, which are up 23 per cent over the year to date compared with a miserable one per cent for the ASX.
But as the US market turned positive for the year this week, gold is struggling to regain momentum and the benchmark price is sagging from a recent all-time high of $US3500 an ounce set in April to around $US3234 an ounce.
The outlook for gold is exceptionally important for Australian investors. Apart from being the nation’s fourth largest export, it offers a substantial ASX-listed sector which is up 33 per cent this year. Gold stock favourites such as Regis Resources – up around 70 per cent – and Evolution Mining is up more than 60 per cent.
However, it’s the arrival of “mum and dad” investors through ETFs which is a key difference in the gold market of 2025.
Many of those investors would know that the weakness of gold investing is that it produces no income; it’s all about price action.
Not as many everyday investors might be aware of gold’s ability to go south for long stretches after a spell of speculative excitement. In the wake of the global financial crisis, gold fell by one third after investors steadily exited what they had until then regarded as a “safe haven”.
The issue in mid 2025 is that many of the fundamentals that pushed gold higher are now weakening. Global interest rates are still due to fall, but traders have peeled back expectations on US rates from four potential cuts to just two cuts in the months ahead.
Separately, inflation, whereby gold is meant to act as the ultimate hedge, has been moving lower in the US. Consumer price inflation in the US cooled for third consecutive month during April, which in turn pushed the US market into positive territory for the first time this year.
ABC Bullion Australia general manager Jordan Eliseo says: “The gold price ran very hard in recent months and it would not be unexpected to have a period of consolidation now. But I expect the long-term bull market for gold to play out.”
At Australia’s best-known gold-based ETF – the GlobalX GOLD fund – analysts say gold prices fell directly after “much better than expected outcomes” following the tariff negotiations between US and China. They point to “significantly reduced bets on Fed rate cuts in 2025”, and say gold has historically benefited from lower rates.
Among the key questions for gold investors is whether the Trump-driven uptick in global equities can continue; and, whether inflation will remain subdued with the full impact of Trump’s tariffs still to hit US consumers.
On the upside, Global X says investors have continued to push into gold during April, creating the biggest inflow to ETF gold since 2022 when Russia invaded Ukraine.
Meanwhile, investment bank JPMorgan is openly bullish about the prospects for gold and gold mining stocks – even with the outsized gains put through over the year to date.
“We continue to like the sector (listed gold stocks) on the structural drivers of gold demand … equities show valuation support,” JPMorgan says.
“However, as the market moves to risk-on, the space is likely to be vulnerable to short-term profit taking.
“Considering global tensions are unlikely to go away completely, we believe this would be a buying opportunity.”
James Kirby hosts the twice-weekly Money Puzzle podcast
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