Gold Hits Record Highs on Stagflation Fears and Record ETF Inflows
Monday, 2/24/2025 15:58
GOLD PRICES surged to a record high above $2956 on Monday, following the release of stagflationary US economic data, while the giant gold SPDR Gold Trust ETF grew at its fastest pace since the Covid crisis,
writes Atsuko Whitehouse at BullionVault.
Spot gold climbed 0.3% to touch a fresh peak of $2956 per ounce Monday lunch time before giving up its earlier gains.
“US economic data—from consumer sentiment to housing and services—was terrible and highly stagflationary, which was enough to spook risk assets with a wipe out in US stocks,” said Nicky Shiels, head of metals strategy at Swiss refining and finance group MKS Pamp.
S&P 500 futures pointed to a rebound on Monday after US stocks sold off on Friday.
The S&P 500 and the Dow Jones Industrial Average both closed 1.7% lower last session, the biggest daily drop so far in 2025. It came after the University of Michigan consumer sentiment index fell nearly 10%, while the five-year inflation outlook in the survey was a 30-year high of 3.5% as consumers expressed concerns over higher inflation due to potential new tariffs.
Additionally, US existing home sales declined more than expected and the US service Purchasing Managers’ index (PMI) dropped into contraction territory for February, according to S&P Global.
Investors sharply increased their holdings in giant
gold-backed ETF the SPDR Gold Trust (NYSEArca: GLD) last Friday, with the fund expanding by nearly 21 tonnes of bullion to reach its largest size since August 2023 at 904 tonnes. The weekly growth rate of 4.4% was the highest since the early stage of the Covid crisis in March 2020.
“Gold ETF holdings will likely hold the key to higher (gold) prices,” said Gregory Shearer, Head of Base and Precious Metals Strategy at J.P. Morgan,
noting that gold remains only around 2% of investor financial assets and that notional ETF holding remain below their 2020 peak.
GLD’s notional holdings are still 23% lower than their recent peak in May 2020 and 34% below the all-time high in 2010, following the global financial crisis and leading into the European debt crisis.
The smaller iShares gold ETF (NYSEArca: IAU) also expanded last session, making its fourth consecutive weekly gain and reaching its highest level since November 2023 at nearly 400 tonnes. IAU remains 26% below its recent peak in November 2020.
US finance giant and London bullion clearer J.P. Morgan Research forecasts that the gold price will rise toward $3000 per ounce in 2025, citing central bank purchasing as another key factor.
“Central Banks aren’t done with gold yet with added political uncertainty likely helping to stoke a revival into 2025,” said Shearer.
Meanwhile, Chinese Vice Premier He Lifeng expressed "
serious concern” over President Donald Trump’s 10% tariff hike on Chinese goods during a call with US Treasury Secretary Scott Bessent on Friday.
At the same time, Secretary Bessent urged Beijing to take stronger measures to curb fentanyl trafficking and rebalance its economy.
Gold prices on the Shanghai Gold Exchange continued to show a premium over London, although it eased to just over $5 per ounce on Monday, despite the Yuan price rising back towards its all-time high of ¥688 per ounce. The incentive for new bullion imports to the world’s top gold-consuming market turned premium before Donald Trump returned to the White House in January, after being constantly trading at a discount since August 2024.
Gold priced in Euros meantime edged 0.3% higher to €2816 per ounce on Monday as the single currency gained against the US dollar in the FX markets and German stocks rose following a weekend election victory by the conservatives CDU/CSU party led by Friedrich Merz.
The
UK gold price in Pounds per ounce also rose 0.3% to £2331 as British Prime Minister Keir Starmer prepared to visit Washington this week to discuss Ukraine and European security as French President Emmanuel Macron.
Western leaders attended events in Ukraine on Monday marking the third anniversary of the country’s war with Russia, with many pledging more military aid in a defiant show of support for Kyiv amid growing uncertainty over President Trump’s administration’s commitment to helping Ukraine resist the Russian invasion.
Gold prices have climbed over $1000 per ounce since the start of the Russian invasion of Ukraine on 24 February 2022.
Silver prices, which are primarily driven by industrial demand—accounting for nearly 60% of its annual usage—edged 0.1% higher to $32.51 per ounce.
The grey metal rose over $7 per ounce since the start of the Ukraine conflict.
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