In 2025, global financial markets are experiencing unprecedented structural disruptions, while gold has emerged as a standout performer. Since the beginning of the year, gold prices have demonstrated extraordinary resilience amid intense volatility. In January, New York gold futures rose by 7%, marking the best start in a decade. Prices then surged to a historic high of USD 3,400 per ounce, with a cumulative increase of nearly 30%. Although gold briefly dipped below the USD 3,000 level in April due to adjustments in Trump's tariff policy, it quickly rebounded and remained above USD 3,200.
Market analysts widely agree that when Trump's tariff policies are unpredictable, the outcome of U.S.-European geopolitical financial tensions is uncertain, and the Federal Reserve's monetary stance is caught in a dilemma, gold has become the only asset globally recognized as a safe haven. A senior researcher at ANBOUND noted that the surge in gold investment reflects deeper investor anxieties. Many investors are struggling to see where markets are headed due to a flood of interfering factors. Unable to make clear judgments, they seek shelter in safe-haven assets. Meanwhile, U.S. capital markets have reached unprecedented highs, raising questions about how much further they can rise.
At the heart of the issue is a sharp rise in uncertainty surrounding trade, monetary, and fiscal policies, which has severely impaired investor judgment. On the trade front, the Trump administration's frequent shifts in tariff policy, combined with retaliatory measures from other countries, have caused significant market swings. As a result, investors find it difficult to forecast asset prices. JPMorgan CEO Jamie Dimon warned that tariffs have caused businesses to pause investments, cautioning that "uncertainty is not a good thing".
When it comes to monetary policies, tensions between the Fed and the Trump administration over interest rate policy have disrupted the bond market. Overseas investors who rely on U.S. Treasuries as a traditional safe-haven asset are now exposed to unexpected risks. Japan's Norinchukin Bank, for instance, suffered a massive loss of JPY 1.8 trillion due to misjudging U.S. interest rate trends, indicating the challenges long-term investors face amid diverging policy signals.
On the fiscal front, rising U.S. debt levels have triggered alarm among investors. Several major investment firms have stated they will not add any long-dated Treasury holdings and warned that if the U.S. government does not act to reduce the fiscal deficit, it could provoke a "bond vigilante" response. Concerns over deteriorating fiscal discipline led Moody's to downgrade the U.S. credit rating from Aaa to Aa1 on May 16, reinforcing the need for investors to reassess U.S. dollar-denominated assets.
Amid such a complex situation, investors, unable to clearly assess future trends, are increasingly feeling the pressure of having nowhere safe to place their capital. The broad shift toward gold reflects a defensive strategy: when accurate forecasting is impossible, it would be safer to hold assets that hedge against uncertainty. Especially when traditional safe havens like Treasuries are themselves volatile, precious metals like gold become the ultimate fallback. Goldman Sachs' prediction that gold prices may reach USD 4,000 by 2026 illustrates the market's longer-term acceptance of this mindset.
Adding to the concerns, U.S. stock valuations are at historic highs, creating further doubts about future returns. A February 2025 survey by Bank of America found that 89% of fund managers believe U.S. equities are overvalued, the highest reading since April 2001. Rosenberg Research reported that the Shiller P/E ratio for the S&P 500 had reached 38.1, approaching levels seen before the 2000 dot-com bubble. Fed officials have also warned that equity risk premiums are near historic lows, making markets vulnerable to shifts in economic data or sentiment.
Moreover, the tech sector, which has been the main engine of growth in the S&P 500, shows signs of divergence between valuation and earnings potential. According to a Morgan Stanley report, the projected earnings growth for the so-called "Magnificent Seven" tech giants (including Nvidia, Apple, and Meta) is only 18% in 2025, significantly down from 34% in 2024. This combination of high valuation and low growth has sharply dampened enthusiasm for U.S. stocks.
Meanwhile, the traditional inverse relationship between stocks and bonds, the so-called "see-saw effect", is unraveling. This structural shift has accelerated capital flows into gold.
For a long period of time, the negative correlation between U.S. equities and Treasuries allowed investors to hedge naturally; i.e., when stocks fell, bonds rose and vice versa. However, following the Munich Security Conference in early 2025, signs of decoupling began to appear. Treasury yields surged to a 14-month high of 4.791%, while the S&P 500 continued to decline, and the dollar index also fell. This rare impact on stocks, bonds, and the dollar has been described by ANBOUND as a geo-financial war between the U.S. and Europe.
When European investors began divesting from U.S. dollar assets due to ideological conflicts, even prominent Wall Street figures such as BlackRock CEO Larry Fink admitted that they are reducing their exposure to U.S. debt and reallocating capital to European assets. This trend was further reinforced when Moody's downgraded the U.S. sovereign credit rating, diminishing the appeal of U.S. debt as a safe-haven investment.
Facing the combined pressures of valuation bubbles, geopolitical tensions, and policy uncertainty, both investors and central banks have been retreating from traditional safe assets and turning to gold, an asset with no sovereign risk, as the new safe harbor. Stablecoins are another option, as ANBOUND has previously explained. Recent data reflects this shift. U.S. gold inventories have surged 35% in just six months to 23 million ounces. The SPDR Gold ETF has ended a two-and-a-half-year streak of net outflows and returned to net inflows. China's gold ETF holdings have risen nearly fourfold year-over-year. A recent report from the European Central Bank revealed that global central bank gold reserves are rapidly approaching the 38,000-ton peak last seen during the Bretton Woods era of the 1960s. Gold now accounts for 20% of official reserves, surpassing the euro for the first time to become the world's second-largest reserve asset.
This structural shift in reserve holdings is especially pronounced in emerging markets such as China and India. The People's Bank of China has increased its gold holdings for seven consecutive months, with a total net increase of 1.03 million ounces. i.e., about 32 tonnes. India's central bank too, has doubled the share of gold in its reserves over four years, from 5.87% to 11.70%. These strategic moves are both a hedge against risks during de-globalization and a proactive redefinition of what constitutes safe reserve assets.
The future direction of gold prices will depend heavily on when global markets regain clarity in their investment outlook. But this process is likely to take time and involve considerable adjustment. Gold's current strength fundamentally reflects global capital's collective confusion amid policy opacity and geopolitical conflict. As traditional pricing anchors fail under divergent policy regimes, gold, being free from sovereign risk, has evolved from a peripheral asset into a systemic hedge.
In the present climate of heightened global uncertainty, gold will continue to serve as a buffer in the ongoing geo-financial conflict. It is both a strategic tool for central banks to rebuild reserve security and a temporary refuge for capital lost in a fog of market unpredictability. Eventually, gold's safe-haven premium will diminish as markets find direction. But clearly, reaching that point will still take some time.
Final analysis conclusion:
Gold's exceptional performance reflects global capital's collective uncertainty in the face of geopolitical tensions and policy confusion, a sharp contrast to ANBOUND's recent projection that the U.S. economy will grow by 3.5% in 2025. In this high-uncertainty environment, gold will continue to play the role of a buffer in the geo-financial battlefield. Its safe-haven premium will eventually fade as market clarity returns, yet for now, that endpoint is still some way off.
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Siyu Bian is an Economic Research Fellow at ANBOUND, an independent think tank.
