Gold was shining bright for most of this year, reaching a new high of $4,382 per ounce in mid-October, which brought its gain to over +60% year-to-date and more than +100% since the end of 2023. More recently, however, momentum has shifted, with gold falling roughly -10% from its peak over just a few days.
Naturally, this raises the question: Has gold’s rally ended, or is it simply on pause in the middle of a structural bull market?
From our perspective, the recent pullback represents a healthy correction, not a reversal. The long-term case for gold remains intact.
Drivers of Performance
The primary drivers of gold’s strength this year have been investor concerns about inflation, rising government debt, and foreign central banks buying gold to diversify away from the U.S. dollar. More recently, exuberant optimism began to build as institutional investors poured money into gold-backed ETFs alongside a frenzy of retail buying – from Costco stores to local shops around the globe. Remarkably, the price of gold rose by more than $1,000 per ounce in just six weeks.
A Reset, Not a Reversal
While sentiment became overextended, the fundamental forces supporting gold remain intact. Concerns about government debt and real interest rates are unlikely to fade anytime soon. Foreign central banks continue to purchase gold at about twice the pace during the pandemic. Additionally, the volume of gold held by major U.S.-based ETFs has increased this year but still sits below 2022 levels. On a broader scale, the total value of all above-ground gold equals only about 4% of global wealth, compared to more than 20% in the early 1980s.
Our Take
Corrections like this one often unfold over months, not days or weeks. We see the recent weakness as part of a healthy market cycle rather than the end of gold’s run. Gold continues to serve as an important diversifier and store of value within portfolios, offering resilience in periods of uncertainty. As always, we remain patient and disciplined through short-term volatility, confident in gold’s ability to enhance the long-term risk-reward profile of diversified portfolios.
At Heritage, we view short-term fluctuations through the lens of long-term opportunity. Gold’s role as a diversifier and store of value remains an important part of disciplined portfolio construction. As global markets continue to evolve, our Investment Advisory team will remain focused on positioning portfolios to balance resilience, opportunity, and long-term growth.
Disclosure: Past performance is no guarantee of future results, and the opinions presented cannot be viewed as an indicator of future performance. These materials are provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities.
