Gold prices fall but the potential for increase is still strong

According to a market strategist, gold prices continue to fluctuate around $2,900/ounce, but this precious metal still has great potential to increase as demand from investors is increasingly strong.

In an interview with Kitco News, George Milling-Stanley - chief gold strategist at State Street Global Advisors (SSGA) - said that although gold exchange-traded funds (ETFs) have not attracted much cash flow in this price increase, market sentiment is changing rapidly as investors see new potential for gold.

February was the time of a boom in the gold ETF market, when North American investors rushed to buy.

According to the World Gold Council, last month, North American ETFs attracted 72.2 tonnes of gold, worth $6.8 billion, marking the month with the largest cash flow since July 2020 and the February with the strongest capital flow ever.

Milling-Stanley said that in the context of economic uncertainty and complex geopolitical situations, investors are looking to gold as a safe haven and anti-inflation channel.

Notably, most of this capital flows into SPDR Gold Shares (NYSE: GLD) - the world's largest gold ETF, managed by State Street.

Data from the GLD shows that more than 20 tonnes of gold were purchased in the fund on February 21 - the largest increase in a single day in more than three years. In total, the GLD has increased nearly 22 tons of gold since the beginning of the year, with an estimated capital flow value of about 1.9 billion USD.

Although the GLD's gold holdings have increased sharply, Milling-Stanley believes that there is still room for investment demand to continue to expand. Currently, the GLD holds 894 tonnes of gold, down 33% from its all-time high in December 2012 and 30% below the peak of the previous rally in October 2020.

Milling-Stanley predicts that gold investment demand will continue to increase, supported by three main drivers.

First, central banks around the world are buying gold in record volumes, marking a major change in the financial market. Over the past three years, central banks have purchased more than 1,000 tonnes of gold per year to diversify reserves and reduce dependence on the US dollar.

Second, the global economy faces many uncertainties and the risk of recession is increasing, making gold even more attractive as a safe-haven asset.

Third, physical demand for gold in Asia remains strong, continuing to create momentum to push prices up.

ETF investors have been somewhat slow in this rally, but I am happy to see them get involved. I believe that investment demand for gold will continue to increase. The reasons for gold prices are not lost, but are even getting stronger, Milling-Stanley said.

Milling-Stanley kept his gold price forecast for 2025, with a 50% probability of fluctuating between $2,600-2,900/ounce, and a 30% chance of reaching $3,100/ounce.

We are seeing too much uncertainty, and the only thing I can confirm for sure is that gold always benefits from uncertainty, he stressed.