Gold recently hit record highs, and many money managers are still betting on further gains. They say the same mix of economic and geopolitical forces that pushed bullion to new levels hasn’t gone away. For investors, that means the case for holding some exposure to gold remains compelling — though it comes with risks.
Why money managers remain bullish
Portfolio managers point to several structural and cyclical drivers that support higher gold prices:
- Inflation concerns: Persistent price pressures reduce the appeal of cash and push investors toward assets that can preserve purchasing power.
- Low or negative real interest rates: When yields adjusted for inflation stay low, the opportunity cost of holding non-yielding gold falls.
- Central bank buying: Many central banks continue to add gold to diversify reserves away from a single currency.
- Weak dollar: A softer dollar makes gold cheaper for holders of other currencies, often supporting demand.
- Geopolitical uncertainty: Tensions and market volatility tend to boost safe-haven flows into bullion.
- ETF and investor inflows: Exchange-traded funds and retail interest have been important channels for capital into the metal.
- Supply constraints: Mining output and above-ground supply are not rising quickly enough to meet demand spikes.
How these forces are still at work
These drivers aren’t all temporary. Inflation can stay elevated if supply-chain frictions persist or energy costs remain high. Central banks often move slowly and are likely to keep diversifying reserves over years, not months. Geopolitical risks don’t vanish overnight, and the dollar’s path depends on a wide mix of policy and growth signals — all factors that can keep gold in demand.
Meanwhile, investor behavior can feed on itself: rising prices attract attention and inflows, which in turn lift prices further. That momentum effect is one reason some managers expect more upside even after a rally to fresh highs.
Risks that could cap gains
Even so, the bullish case has important counters that money managers watch closely:
- Tighter monetary policy: Faster interest-rate increases or a firmer policy stance could raise real yields and reduce gold’s appeal.
- Stronger dollar: A sustained dollar rally would make gold more expensive for foreign buyers and can pressure prices.
- Profit-taking and technical corrections: After a steep run, markets often pull back as traders lock in gains.
- Improved economic data: If growth and confidence rebound, investors may rotate out of safe havens into risk assets.
- Supply response: Higher prices can spur mine investment and secondary market selling over time, easing shortages.
How investors are positioning
Money managers and advisers use several approaches to capture a potential upside in gold while managing risk:
- Core allocation: Holding a small, strategic percentage of a portfolio in gold as an inflation and tail-risk hedge.
- ETFs and funds: Using exchange-traded funds for liquid, cost-effective exposure without storing metal.
- Physical bullion: Buying coins or bars for investors focused on long-term preservation and avoidance of counterparty risk.
- Mining stocks and royalties: Investing in producers and royalty companies for leveraged upside, with higher volatility.
- Options and tactical trades: Employing derivatives to express views while limiting downside through defined-risk positions.
- Diversification and sizing: Keeping gold positions modest relative to the total portfolio to manage drawdowns.
Practical takeaways
- Gold’s recent run and the arguments behind it make a strong case for continued interest from money managers.
- But the outlook is not one-way. Interest-rate moves, currency swings, and market sentiment can quickly change the picture.
- For most investors, a balanced approach — clear allocation rules, attention to costs, and an eye on risk — is the sensible path.
In short, many professionals still see room for gold to climb because the broad forces that drove it to a record high are largely still present. That doesn’t mean it’s a sure bet, but it helps explain why bullion remains a favored part of many portfolios today.