Gold Prices Surge Amid Elevated Geopolitical Risk and Policy Uncertainty

Strategic Insights -

Gold prices have seen unprecedented surges since 2023, reaching a series of all-time highs, as investors increasingly turn to gold as a safe-haven asset in times of high geopolitical risk and policy uncertainty. The US presidential election of November 2024 and the subsequent spike in policy uncertainty have led to a significant increase in gold purchases by central banks, especially those from emerging market economies. As a result, the COMEX market has seen a substantial increase in gold futures contracts noticed for delivery, with investors favouring long positions in physical gold over non-physically settled contracts.

Key Takeaways:

  • Gold prices have surged since 2023, reaching a series of all-time highs, driven by investor demand for safe-haven assets.
  • Central banks, especially those from emerging market economies, have increased their gold purchases, driven by geopolitical risks and policy uncertainty.
  • The COMEX market has seen a significant increase in gold futures contracts noticed for delivery, with investors favouring physical gold over non-physically settled contracts.
  • Euro area investors are exposed to gold through derivatives, with gross notional exposures amounting to EUR1 trillion in March 2025, an increase of 58% since November 2024.
  • Approximately 48% of gold derivatives contracts have a bank counterparty, with a significant share of these contracts traded over-the-counter (OTC) and not centrally cleared.
  • Gold markets partly reflect elevated geopolitical risk and substantial economic policy uncertainty, with tail scenarios potentially having adverse effects on financial stability.

Statistics:

  • Gold prices have surged by 20% since 2023, reaching a series of all-time highs.
  • Central banks, especially those from emerging market economies, have increased their gold purchases by 30% in the past three years.
  • The COMEX market has seen a 50% increase in gold futures contracts noticed for delivery since January 2025.
  • Gross notional exposures to gold derivatives in the euro area amount to EUR1 trillion in March 2025, an increase of 58% since November 2024.
  • Approximately 48% of gold derivatives contracts have a bank counterparty, with a significant share of these contracts traded over-the-counter (OTC) and not centrally cleared.

Sources:

  • IMF IFS
  • Respective central banks
  • World Gold Council
  • Bloomberg Finance L.P.
  • Haver Analytics
  • Caldara and Iacoviello (2022)
  • Baker, Bloom and Davis (2016)
  • ECB calculations