NOVEMBER 2025
Precious metals are having a banner year with the gold price up 50% in U$ terms; by far its best performance since the 1970s.
This is grabbing a lot of market attention, but what’s less well known is how well gold has performed over the longer-term, especially relative to other major assets.
The chart below shows the rebased 10-year returns of gold (dark blue), the FTSE All-World equity index (red) and the FTSE World Government Bond index (light blue). All in U$ terms.
Bullion’s near 240% (13% p.a.) gain comfortably beats even the high-flying global stock market, which has added 200% (12% p.a.) over the past decade. Whilst the measly 4% total return (or 0.4% p.a.) produced by sovereign debt is hardly worth mentioning.
With “bubble talk” intensifying in equity markets, the above statistics raise the question: can gold’s record-breaking run continue?
In the short-term, a significant pullback is clearly on the cards, but the main catalyst for this impressive run is investors seeking a hedge against policy largesse and that long-term trend looks set to persist.
A general rule of thumb is that a bull market (in any asset) is typically getting long in the tooth whenever retail investors start to buy en masse.
So the chart below is a warning sign for gold bugs.
The number of outstanding shares in the main Gold ETFs are a good proxy for retail investor demand; the figure rises when there is growing interest (and vice versa).
The blue line relates to one of the large US-listed Gold ETFs, which has clearly become more popular since early 2024, but in a relatively orderly way. In short, US retail investors are buying more gold, but not to the same extent that we saw just a few years ago.
Conversely, the red line shows a recent surge in buying of Gold ETFs in China. The parabolic nature of this uptrend suggests Chinese retail investors may soon reach a state of exhaustion, which argues for a slowdown, or even a weakening, in gold demand from this dominant buyer.
Central Bank buying of gold has been running hot of late as policymakers look to protect themselves against inflation, fiat currency debasement and a general rise in geopolitical risk.
Despite this, gold remains a minority allocation within official reserves.
According to the IMF data, shown in the chart below, state ownership of gold reached approx. U$2.4trn in June, but this represents just 15% of total international reserves.
For context, foreign currency assets (mainly dollar and euro-denominated bonds) still make up the vast majority of the mix.
At the 1960s peak, around two-thirds of the official sector’s savings were held in gold.
Which suggests there is ample scope for Central Bank purchases of gold to continue.
The chart below speaks to the heart of what’s driving the gold price materially higher and was originally produced by Tavi Costa of Crescat Capital.
It shows the gold price divided by the total US money supply, dating back to the 1960s.
Money supply refers to the total amount of money circulating in the economy and rises during periods of expansionary monetary policy (and vice versa).
The supply of US dollars has surged in recent years, reflecting the Federal Reserve’s near constant liquidity injections to help boost growth and underpin stability in a heavily indebted financial system.
However, the recent gold price increase is relatively modest in the context of the money supply growth, particularly compared to the late 1970s.
With “dollar debasement” policies unlikely to reverse any time soon, the gold bull market may still have a lot further to run.
The content of this communication is for information purposes only. Bentley Reid believes that, at the time of publication the views expressed and opinions given are correct but cannot guarantee this and readers intending to take action based upon the content of this communication should first consult with the professional who advises them on their financial affairs. Any companies cited in this report are used to support the view of the authors, and should not be construed as recommendations to purchase or sell the underlying securities. Neither the publisher nor any of its subsidiaries or connected parties accepts responsibility of any direct or indirect or consequential loss suffered by a reader or any related person as a result of any action taken, or not taken in reliance upon the content of this communication.
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