Gold investment demand remains strong despite price volatility
NEW YORK (March 9) Despite gold’s recent disappointing price action, as the precious metal has been unable to hold a safe-haven bid, it continues to attract strong investor interest due to broader geopolitical tensions and shifting macroeconomic conditions, according to the World Gold Council.
In February, global physically backed gold ETFs recorded inflows of $5.3 billion, marking the ninth consecutive month of net inflows and the strongest start to a year on record. Total global holdings increased by 26 tonnes to 4,171 tonnes, while rising gold prices pushed assets under management to a record $701 billion, according to the World Gold Council’s latest ETF flows report published last week.
Much of the demand continues to come from North America, which accounted for $4.7 billion of February’s inflows, extending a nine-month streak of investment demand. The World Gold Council noted that such sustained inflows have historically occurred during periods of elevated systemic risk, such as the Global Financial Crisis and the COVID-19 pandemic.
Investor demand has also remained resilient across other regions. Asian gold ETFs recorded $2.3 billion in inflows during February, extending a six-month streak of positive demand, led by Japanese investors amid political uncertainty, a weakening yen, and strong gold price performance in local currency terms.
European was the only region where funds recorded outflows, losing $1.8 billion, primarily due to early-month redemptions following a late-January precious metals selloff. Despite this, flows later in the month turned positive, suggesting the outflows were not indicative of a longer-term shift in investor sentiment.
In an interview with Kitco News, Joe Cavatoni, Senior Market Strategist at the World Gold Council, said geopolitical tensions remain an important driver behind persistent investor interest in gold. However, he added that while geopolitical shocks can spark sharp rallies, gold’s longer-term performance ultimately depends on underlying fundamentals rather than short-term market reactions.
“There will be gains, but they are better understood once the market sees the outcome of the systemic event,” he said. “In this situation, the conditions will revert to sustained growth in the gold price because we’re not losing sight of the fundamentals that are still moving the asset.”
Although gold prices have started the new month on weak footing, Cavatoni said it is difficult to understand why the long-term uptrend would be coming to an end in a world filled with uncertainty. He added that investors need to recognize that while prices will be volatile at these levels, this remains a healthy function of the market. He explained that higher volatility reflects growing investor engagement with the metal.
“I look at volatility in three areas,” he said. “The first is increased interest and adoption of gold as an investment. When you see that pace of uptake increase, you naturally see higher volatility alongside stronger price performance. We estimate that this is going to continue. So you have this kind of growth trajectory, raising the overall levels of volatility. Then you have momentum, which I would categorize as exuberance; traders would call it FOMO.”
Cavatoni’s comments come as the gold market sees annualized volatility rising to roughly 25–30%, compared with a long-standing industry expectation closer to 15%. However, Cavatoni noted that gold’s price swings are increasingly in line with movements across other asset classes.
“We’re actually tracking with other risk assets,” he said. “Money is moving faster than ever, and there are more market participants involved in gold and silver than ever before.”
He added that gold is providing important liquidity in a broader portfolio that is helping investors weather broad-market uncertainty
However, Cavatoni also noted that not all volatility is beneficial. Structural disruptions in the financial system — such as transportation bottlenecks, tariffs, or market infrastructure issues — can introduce a more unpredictable form of market instability.
“That’s the type of volatility I worry about,” Cavatoni said. “Those are the moments that are radically unpredictable and harder for the market to prepare for.”
Despite periodic turbulence, the broader trend of sustained ETF inflows suggests that investors continue to view gold as an important strategic asset amid rising geopolitical uncertainty and evolving macroeconomic conditions.
Cavatoni said that he expects that even in a volatile environment, gold will remain an important diversifier as it has become more than just a one-dimensional asset driven by interest rate fundamentals.
Although central bank gold purchases have slowed from their elevated peaks over the last three years, he said that official sector demand will remain a stabilizing force, creating long-term value for gold.
KitcoNews
