Onome Amuge

Gold’s rally gained fresh momentum into the end of August, hitting an all-time high of $3,429 a troy ounce and closing the month 4 per cent higher, according to the latest data from the World Gold Council. The precious metal has now gained 31 per cent since the start of the year, outperforming nearly every major asset class as investors hedge against a toxic mix of sticky inflation, slowing growth, and mounting geopolitical tensions.

The rally has extended into early September, underlining renewed conviction in the metal’s safe-haven status. The Council’s Gold Return Attribution Model (GRAM) points to three main drivers behind August’s gains including a weaker dollar early in the month, strong inflows into exchange-traded funds, and persistent geopolitical stress. More recently, growing market expectations of a September rate cut by the US Federal Reserve have added fuel to the rally.

ETF investors have emerged as a decisive force in this latest leg higher. Global gold ETFs drew $5.5 billion of inflows in August, equivalent to 53 tonnes of bullion, with North America accounting for $4.1 billion and Europe $1.9 billion. Asia and other regions saw modest outflows, indicating that Western investors are once again taking the lead. By contrast, futures markets were more restrained, with COMEX managed money net longs rising by $2 billion, or 16 tonnes.

The increase has been broad-based across currencies. This is as gold rose 1.6 per cent in euros, 1.8 per cent in sterling, and 3.1 per cent in Canadian dollars during August, while Turkish investors saw a 5.4 per cent jump in local terms. 

Stagflation fears back in focus

Behind the headline numbers lies a deeper anxiety. The Council warns that US real interest rates are likely to become more influential in the months ahead as Western investors “grab the baton” from emerging markets, whose central banks and retail buyers have been the mainstay of gold demand in recent years.

The Council’s analysis of investor behaviour shows ETF holders to be the most sensitive to stagflationary signals, followed by bar and coin buyers. “Fast money” futures traders, including commodity trading advisers, remain more focused on the trajectory of policy rates and technical positioning.

The US yield curve has steepened in recent weeks, with short-dated yields falling on expectations of Fed easing, while long-dated yields remain elevated due to risk premia and inflation concerns. “The sticky long end might hinder some rates-driven interest in gold. However, a rise in inflation that coincides with slowing activity and weakening labour markets increases stagflation risks — an environment that has historically favoured gold,” the report notes. 

Between 2007 and 2022, gold’s price movements were tightly correlated with US real rates. That link weakened after 2022 as emerging markets ,particularly central banks in Asia became dominant buyers. This helped push gold to decouple from traditional macro drivers. 

“Intraday session returns show that US investors are increasingly steering short-term moves,” the Council said, pointing to data from trading sessions where US hours accounted for the bulk of recent gains. Should rates across the curve start to fall, analysts say, Western buying could accelerate sharply.

The Council’s breakdown of investor behaviour highlights diverging motivations. ETF investors are driven primarily by stagflation risks. Retail bar and coin buyers respond to macro stress, but less consistently. Futures traders are focused on policy rates and technical trends. Meanwhile, central bank demand  (The dominant driver of gold’s decoupling since 2022) has cooled, though reserves managers in emerging markets remain net buyers.

This fragmentation means the next phase of gold’s rally may depend heavily on Western sentiment. “Gold’s sensitivity to US real rates may increase as US investors take a more active role amid softer demand from emerging markets,” the Council stated.

For now, the metal continues to glitter. At $3,429 an ounce, with momentum intact and stagflation clouds thickening, gold is cementing its status as the standout asset of 2025.