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Spot gold hits another record of $3,990.85 an ounce

Tuesday

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Institutional investors drive demand, gold up 51% year to

date

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Gold appeals to investors wary of sky-high stock market

values

By Suzanne McGee and Polina Devitt

Oct 7 (Reuters) -

Outsized flows into exchange-traded funds tracking gold have

helped drive a spectacular rally that pushed bullion to record

highs over the last month, analysts said.

Spot gold prices hit another record of $3,990.85 per

ounce on Tuesday, while U.S. gold futures for December delivery

edged above the $4,000 an ounce milestone. Some analysts cited

the record pace at which investors are allocating money to the

metal via ETFs.

Many investors have grown wary of sky-high stock market

valuations and they view gold as a safe haven providing refuge

from uncertain economic policy and geopolitics. Bullion prices

are 51% higher this year, the largest surge since 1979,

according to LSEG data.

"Institutional investor interest is just getting started,"

said Roukaya Ibrahim, commodities strategist at BCA Research,

who calculated that assets in gold ETFs globally now account for

2.6%, up from 1.9% a year ago.

The intensity of investor interest is unprecedented, said

Ibrahim, adding that clients now keep her on the phone for as

long as 90 minutes at a time to chat about market movements.

State Street Investment Management said inflows into U.S.

ETFs such as the firm's own SPDR Gold Shares have set

all-time records of $35 billion as of the end of September,

ahead of the previous full-year record of $29 billion, set in

2020.

Globally, inflows into gold ETFs hit $64 billion year-to-date,

according to data from the World Gold Council, with a record

$17.3 billion in September alone.

That is a dramatic reversal from recent trends: over the

last four years, gold ETFs have seen outflows totaling $23

billion, the World Gold Council calculated.

Analysts said investors believe gold can hold its value in the

face of economic policy headwinds and rising geopolitical

tensions. They also hope gold can cushion big gains they may

have seen this year as the artificial intelligence boom sent

stocks soaring.

"There's a kind of 'barbelling' here, where gold becomes a hedge

against any failure of the AI-driven tech boom to deliver on its

promises and the policy implications of a crash," said Thierry

Wizman, global FX and rates strategist at Macquarie Group.

Gold, one of the world's oldest financial assets, is making

its way higher in tandem with one of its newest, bitcoin, said

David Schlesser, head of multi-asset solutions at VanEck.

"Both are decentralized store of value assets not tied to

any government," said Schlesser.

Schlesser warns that "no asset goes up in a straight line and we

should expect some tactical pullbacks and volatility," adding

that in this case, "volatility is your friend," giving investors

and traders a chance to jump in on dips. He expects gold prices

to top $5,000 an ounce in 2026 and urges investors to allocate

at least 5% of their portfolio to gold.

Goldman Sachs ( GS ) said in a note published on Monday that it

expects holdings of gold ETFs in North America and Europe to

rise still further as the Federal Reserve cuts U.S. interest

rates into 2026. Mike Wilson, chief investment officer at Morgan

Stanley ( MS ) suggested last month that a 20% allocation to

gold serves as a resilient inflation hedge.

"When you have establishment names like Morgan Stanley ( MS )

telling investors that they don't own enough gold, it's no

surprise to see inflows jump, whether into ETFs or vaulted

bullion," said Adrian Ash, head of research at online

marketplace BullionVault.