Gold’s trajectory in 2025 has been truly extraordinary, culminating in a historic surge above $4,000 per ounce recently. Initially driven by safe-haven demand amid tariff announcements in April, the metal has since shifted its perception among investors. Traditionally regarded as the ultimate refuge during periods of market stress, gold has increasingly detached from that narrative, emerging instead as a clear valuation outlier.
In this edition of Macro Trends, we examine how gold’s structural demand has shifted, how its role in portfolio construction has evolved, and what current valuation patterns reveal about its changing market dynamics.
Central Bank Gold Holdings: Global Accumulation Trends
Insights:
Safe-haven demand: Central banks have used gold as a hedge against geopolitical and inflation risk.
Shift in global reserves: Emerging economies (notably China, India, Turkey) have been leading buyers of Gold since Covid vis-à-vis their DM counterparts
Post-2020 acceleration: The pandemic and last one year's US political uncertainty both triggered gold accumulation.
Gold Performance After Recessions: Historical Surge Patterns
Insights:
Recessionary periods have been followed by higher demand for Gold – with investors seeking Safe Havens amidst uncertain macro.
The chart plots gold price trends rebased to 100 around recession dates. The shaded areas include percentile trends for recessions since 1970s.
Gold price surge since US elections in Nov 2024 closely follows the steep spike seen post 1973 recession.
Short-Term Gold Price Regression and Market Drivers
Insights:
Elevated Trade Uncertainty and Dollar weakness have been two distinct macro narratives in 2025.
We regress Gold over these two high frequency indicators over a 2-year horizon.
Gold marked a runaway surge with increased volatility emanating around key events such as Tariff announcements going into Liberation day.
Insights:
Gold prices moved higher since Jan 2024 in line with the surge in Trade Uncertainty index until Apr 2025.
Post Q1 2025, despite the fall in the Trade Uncertainty index, the northbound move in Gold prices continued.
Gold vs S&P 500: Annual Performance Comparison
Insights:
Gold and equities had moved largely in tandem in recent years, particularly in 2024, when their annual gains differed by only a few percentage points.
In 2025, however, their paths diverged sharply.
Following the Liberation Day tariffs announcement in April, the S&P 500 suffered a 19% drawdown, while gold surged on renewed safe-haven demand.
Although the S&P 500 has since recovered, now up roughly 13% year-to-date, gold has climbed significantly higher, delivering an impressive 57% gain.
Please note that the chart can also be extended back to 2020.
60/40 vs 60/20/20 Portfolio Analysis: The Case for Gold Allocation
Insights
The 60/40 portfolio – with 60% in equities and 40% in bonds – is a long-standing classic in investing, favoured by traditional investors and pension funds for its historically balanced risk and return profile.
However, the prolonged under performance of bonds has raised questions about its profitability, prompting many to explore alternative allocations.
Given the recent surge in gold, adding this precious metal to the mix appears to be a compelling option. In fact, the so-called 60/20/20 portfolio, which allocates20% to gold, has consistently outperformed the traditional 60/40 strategy.
Global Safe Haven Assets: Three-Criteria Comparative Study
Insights
The role of gold as a true safe haven has faced growing critics among investors.
In this visualisation, we examine to what extent various assets can be classified as safe havens based on three criteria:
- Annualised daily volatility <S&P 500.
- Maximum drawdown (5-year rolling)<= S&P 500.
- Correlation with the S&P 500< 20%, as a general threshold.
Under these conditions, gold continues to qualify as a safe haven, meeting all three criteria.
In contrast, other traditionally perceived safe-haven assets fail at least one test – both the Swiss franc and the Japanese yen do not meet the drawdown criterion, while many low-volatility stocks show relatively high correlation with the S&P 500.
Gold Price Regression: Short-Term Macro Relationships
Insight
Using a rolling three-year regression framework based on real rates, inflation, the dollar, and risk sentiment (usual factors explaining Gold’s performance), we find gold is the clearest valuation outlier.
Its price sits well above the level implied by these modeled macro relationships. In contrast, its haven peers (Treasuries, TIPS, the yen, and the Swiss franc)appear relatively balanced.
Gold's divergence is thus idiosyncratic, driven by factors beyond the usual macroforces.
Continued central-bank accumulation, renewed ETF inflows, and persistent geopolitical and fiscal uncertainties are all likely supporting this premium.
