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Gold breaks through the 3000-dollar mark for the first time: what now?
05/03/2025
Gold prices have been steadily rising. But what’s behind the recent record highs? And is it still worth investing in gold?
Key takeaways
- Gold has seen significant price increases, drawing growing interest from both private and institutional investors.
- Investors can buy gold physically in the form of bullion or coins, or indirectly through gold mining stocks.
- Another option is investing in funds and ETFs or ETCs, which can offer flexibility, diversification and potential returns.
For thousands of years, gold has captivated mankind – as jewelry, a ritual object, and a form of currency. In ancient Egypt, gold was considered the “skin of the gods,” and medieval sought the philosopher's stone to transform base metals into gold. Its durability and perceived stability have made it one of the world’s most coveted resources.
Even in the modern financial world, gold plays an important role – for example, as an investment in uncertain times. But how investors gain exposure to gold? What investment options are available? And what are the associated opportunities and risks?
Gold Rush 2.0?
Gold Rush 2.0?
Before we take a closer look at the investment opportunities in gold, let's take a look at gold’s recent price trajectory – which has been more than remarkable recently.
2024 was an outstanding year for gold, with prices increasing over 27% [1] – the highest annual increase since 2010. The metal set new all-time highs 40 times throughout the year. [2] This momentum has carried into 2025. The price of gold has broken through the 3,000 US dollar per fine ounce for the first time.
What’s driving the surge?
Why is gold experiencing such as strong rally? As is often the case, multiple factors are at play.
- Interest rate expectations: The anticipation of lower interest rates has been a key driver. Since gold doesn’t generate yield, it becomes more attractive when returns on interest-bearing assets decline.
- Central bank demand: Some central banks particularly China and emerging markets – have increased their gold reserves. Their goal? To reduce reliance on the U.S. dollar and diversify foreign exchange holdings.
- Geopolitical uncertainty: Trade tensions, such as tariffs introduced under U.S. President Donald Trump, have driven investors toward gold as a safe-haven asset.”.[3]
What if these risks subside? “Then we could see a short-term decline in the price of gold,” said DWS portfolio manager Darwei Kung. However, he believes strong underlying demand from governments will continue to support the price of gold. Short-term dips may present attractive entry opportunities for investors looking to invest in gold long term.
Physical or virtual gold investments
Investors looking to gain exposure to hold have two main options:
- Direct ownership (physical gold, such as bars or coins)
- Indirect investment through financial products or gold mining stocks.
Each approach has advantages and drawbacks.
Physical: gold bars and gold coins
During economic uncertainty, physical gold in the form of bars and coins is considered particularly attractive. Why is that? One reason is its limited availability. Unlike paper money, gold cannot be reprinted or reproduced. This scarcity can contribute to value stability. While paper money loses purchasing power in times of high inflation, gold retains its value or can even rise.
However, investors should consider additional costs for secure storage. Keeping gold under a pillow is neither practical nor safe. Most investors opt for bank deposit boxes or safes, which add to the cost of ownership.
Another drawback is liquidity: selling gold can be time-consuming and may involve high transaction fees. Additionally, unlike stocks or bonds, gold doesn’t generate ongoing income through interest or dividends. Still, for those who prefer tangible assets, it remains a compelling option.
Intelligent risk diversification: investment funds, ETFs and ETCs
For those who want exposure to gold without physically holding it, investment funds, exchange-traded funds (ETFs) or exchange-traded commodities (ETCs) offer a comparatively flexible alternative. These financial products are traded on the stock market, providing easier access and diversification.
Gold mining stocks: a way to earn income
Investing in gold mining companies offers another way to capitalize on rising gold prices. Unlike physical gold, mining companies generate cash flow and profits, offering investors the opportunity to achieve regular returns through dividends.
However, gold mining stocks often tend to be more volatile than the price of gold itself. Factors such as production disruptions, environmental concerns and political uncertainties can have a negative impact on the share price. Despite these risks, portfolio manager Darwei Kung sees opportunities for companies in the gold sector: “With higher gold prices, companies that achieve their production and cost targets will benefit from a positive revaluation.” He also highlights a trend towards mergers and acquisitions in the sector, as companies seek to increase efficiency and create new mining capacity.
Gold mining stocks even outperformed gold prices at times in 2024. The sector’s profitability surged as rising gold prices boosted revenues while companies kept costs under control. However, one possible reason this hasn’t yet reflected into higher stock prices may be central bank purchasing habits. While central banks steadily bought physical gold for their reserves, they typically do not invest in gold mining stocks
Gold mining stocks temporarily ahead
In 2024, gold mining stocks beat the gold price in some periods
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Source: Refinitiv, as of 28/02/2025; The FTSE Gold Mines Index is a stock index that includes the stocks of companies that generate income primarily from gold mining. Past performance is not a reliable indicator of future performance.
Stocks of gold mining license companies
Another way to gain indirect exposure to gold is to invest in royalty companies. Unlike traditional mining firms, these companies do not build and operate the gold mines themselves. Instead, they finance various mining projects and in return receive a share of the production.
The key advantage of royalty companies is that they avoid direct operational risks, as they do not manage the day-to-day challenges of mining. Instead, they generate revenue through agreed upon royalty payments, making them less vulnerable to the operational risks of mining and still offer an opportunity to benefit from rising gold prices. While their performance is still influenced by gold prices, they are generally considered a lower-risk alternative to traditional mining stocks.
Conclusion for investors
Gold can be an important component of a balanced portfolio – both for risk reduction and as a potential return opportunity. Investors should choose the appropriate gold investment based on their individual risk appetite and investment strategy. Funds, gold ETFs or gold ETCs provide a flexible way for investors to benefit from rising gold prices.