Gold prices are currently fluctuating around $2,900/ounce, but the precious metal still has great upside potential as investor demand is increasing, according to a market strategist.
In an interview with Kitco News, George Milling-Stanley - chief gold strategist at State Street Global Advisors (SSGA) said that although gold ETFs have not attracted much attention in this price increase, market sentiment is changing rapidly as investors see new potential for the precious metal.
February was a special period for the gold ETF market when North American investors poured heavily into these funds.
According to the World Gold Council, 72.2 tonnes of gold, equivalent to $6.8 billion, have flowed into North American ETFs - the highest level in a month since July 2020 and the February with the largest capital flow ever.
Milling-Stanley said that with increasing economic uncertainty and geopolitical upheavals, investors are looking to gold as a safe haven asset and a hedge against inflation.
Notably, most of the capital flows have flowed into the SPDR Gold Shares (NYSE: GLD) fund - the world's largest gold ETF fund, managed by State Street.
Data from the GLD showed that on February 21, the fund received more than 20 tonnes of gold - the largest increase in a single day in more than three years. The total amount of gold of the GLD has increased by nearly 22 tons this year, with the value of inflows reaching 1.9 billion USD.
Although the GLD has recorded a significant increase in holdings, Milling-Stanley believes there is still room for investment demand to continue to increase.
The GLD currently holds 894 tonnes of gold, down 33% from its all-time high in December 2012 and down 30% from the previous bull market peak in October 2020.
This expert predicts that investment demand in gold will continue to increase thanks to three main factors supporting the market's price increase.
First, central banks are making a big change by continuing to buy more than 1,000 tons of gold per year over the past three years to diversify assets and reduce dependence on the US dollar.
Second, increasing economic risks and the risk of recession are making gold more attractive as a safe-haven asset.
Third, physical demand for gold in Asia remains strong, supporting prices to increase.
ETF investors have slowed down a bit, but I am happy to see them finally getting involved. I believe that investment demand will continue to increase. The reasons for gold's rally are still there, even stronger, Milling-Stanley commented.
Milling-Stanley maintains a gold price forecast for 2025 with a 50% chance of gold trading in the range of 2,600 - 2,900 USD/ounce, and a 30% chance of the price reaching 3,100 USD/ounce.
There are many uncertainties at the moment, and the only thing I can confirm for sure is that gold always benefits from uncertainty, he said.
