Gold investment interest stays robust even with price fluctuations - Cavatoni of the World Gold Council

Gold Maintains Investor Appeal Amid Market Volatility

Although gold has recently struggled to maintain its traditional safe-haven status, the precious metal continues to draw significant investor attention. The World Gold Council attributes this ongoing interest to heightened geopolitical tensions and evolving global economic trends.

According to the Council’s latest report, February saw global physically backed gold ETFs attract $5.3 billion in new investments. This marks the ninth straight month of net inflows and represents the strongest start to a year ever recorded. Global gold holdings rose by 26 tonnes to reach 4,171 tonnes, and the surge in gold prices pushed total assets under management to a record $701 billion.

Regional Investment Trends

North America led the way in February, accounting for $4.7 billion of the inflows and extending its nine-month streak of robust demand. The World Gold Council highlighted that such persistent inflows have typically occurred during times of heightened systemic risk, such as during the Global Financial Crisis and the COVID-19 pandemic.

Investor enthusiasm was also evident in Asia, where gold ETFs saw $2.3 billion in inflows, continuing a six-month trend of positive demand. Japanese investors, in particular, contributed to this growth amid political uncertainty, a weakening yen, and strong local gold price performance.

Europe was the only region to experience outflows, with funds losing $1.8 billion. This was mainly due to redemptions early in the month following a late-January selloff in precious metals. However, inflows later in February suggest that these outflows were not part of a broader shift in sentiment.

Geopolitical Tensions and Market Fundamentals

Joe Cavatoni, Senior Market Strategist at the World Gold Council, told Kitco News that ongoing geopolitical risks remain a key factor behind sustained investor interest in gold. He emphasized that while geopolitical events can trigger sharp price rallies, gold’s long-term trajectory is ultimately shaped by underlying market fundamentals rather than short-term shocks.

“There will be gains, but they are better understood once the market sees the outcome of the systemic event. 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.”

Despite a weak start to the new month for gold prices, Cavatoni questioned why the long-term upward trend would end in today’s uncertain environment. He pointed out that price fluctuations are a normal part of the market and reflect increased investor engagement.

Understanding Volatility in the Gold Market

Cavatoni explained that volatility in the gold market can be attributed to several factors:

• Growing investor interest and adoption of gold as an investment, which naturally leads to higher volatility and stronger price movements.
• Momentum-driven trading, often fueled by a fear of missing out (FOMO).

Currently, annualized volatility in the gold market has risen to around 25–30%, compared to the long-term industry average of about 15%. Cavatoni noted that gold’s price swings are now more closely aligned with those seen in other asset classes.

“We’re actually tracking with other risk assets. Money is moving faster than ever, and there are more market participants involved in gold and silver than ever before.”

He also highlighted gold’s role in providing liquidity within diversified portfolios, helping investors navigate broader market uncertainty.

However, Cavatoni cautioned that not all volatility is constructive. Disruptions in the financial system—such as transportation issues, tariffs, or problems with market infrastructure—can introduce unpredictable instability.

“That’s the type of volatility I worry about. Those are the moments that are radically unpredictable and harder for the market to prepare for.”

Gold’s Strategic Role Remains Strong

Despite occasional turbulence, the ongoing trend of strong ETF inflows indicates that investors continue to view gold as a vital strategic asset in the face of global uncertainty and shifting economic conditions.

Cavatoni expects that even in volatile markets, gold will remain a valuable diversifier, having evolved beyond being influenced solely by interest rate dynamics.

While central bank purchases of gold have slowed from recent highs, Cavatoni believes that official sector demand will continue to provide stability and long-term value for the precious metal.