Gold established 53 new records throughout the year. Total gold demand in excess of 5,000 tonnes in 2025 was the greatest recorded demand for gold. The cumulative total of those demands, valued at $555 billion, increased by 45% year-over-year. Those aren’t the figures associated with a panic. Rather, these figures indicate a conscious and wide-ranging repositioning of assets by individual investors at all levels of the market. All of whom have determined that the portfolio models used for the previous ten years do not provide adequate protections for the risks inherent to today’s world.
Why the traditional model (60/40) of investing is being tested
For decades, the traditional model for balanced portfolios consisted of sixty percent equity and forty percent fixed-income investments. This structure made sense. When equity prices dropped, bond prices would typically rise. The negative correlation between the two asset classes served as a natural shock-absorbing mechanism. However, this relationship was destroyed in 2022 when both equity and fixed income investments suffered a sharp decline as central banks raised interest rates rapidly to fight inflation. The decline was so severe that 2022 marked the worst year ever for a 60/40 portfolio since the Great Depression.
The experience triggered a re-evaluation that continues to date. As reported by Morgan Stanley’s Chief Investment Officer in September of 2025, he suggested using a twenty percent gold allocation within a revised 60-20-20 portfolio framework, which would allow gold to fill the role once occupied by fixed-income investments as the primary stabilizing component of the portfolio. His reasoning was very clear-cut: given that sovereign debt contains both duration risk and fiscal credibility risk, gold’s zero-counterparty structure, along with gold’s historical price behavior during stressful events, make gold a better diversifying tool than fixed income. Retail investors’ increased use of tracking the gold price today indicates the expansion of the gold market beyond institutional investors.
What central banks are signaling
Over the last three years, the most significant change in the gold market has not been due to either retail investors or changes in exchange-traded fund (ETF) flows. The change has been due to central banks. Prior to 2022, central banks had averaged annual net gold purchases of 400 to 500 tons. From 2022 through 2024, they purchased greater than 1000 tons per annum. While 863 ton of gold was purchased by central banks in 2025, it remains higher than average and occurred globally. Poland acquired 102 tons of gold in 2025 becoming the largest individual purchaser of gold for the second consecutive year.
According to the World Gold Council’s 2025 Survey of Central Bank Gold Reserve Managers, seventy-three percent of respondent central bank reserve managers indicated that they anticipate a moderate to significantly lower percentage of U.S. Dollar holdings in global reserves within five years. Forty-four percent of respondents indicated that they actively manage their gold reserves. Consistent actions by sovereign institutions carry much more weight than short-term market commentary.
A structural aspect further complicates the demand story on the supply-side. Annual global gold mining production totals approximately 3000 to 3500 tons. Production is limited by geology and increasing extraction costs as well as the extended timeframes needed to put new mines into operation. Central bank purchasing alone accounted for approximately 25 percent of total annual supply in 2025. This left less available for other uses such as ETF inflows, retail bar and coin demand and jewelry which all also experienced growth in 2025.
How retail investors are catching up
Historically, retail investor participation in gold markets has trailed behind institutional investors by a significant margin. At the start of 2025, the average retail investor allocated approximately .02% of their overall portfolio to precious metals. Financial advisors now increasingly suggest allocations to precious metals ranging from five to fifteen percent depending upon current market conditions. The difference began narrowing substantially in 2025. Physical backed gold ETF holdings expanded by 801 tons in 2025 marking the second best year on record. Retail bar and coin demand expanded to a twelve year high. Investment demand for gold totaled $161 Billion dollars during the first nine months of 2025 – more than twice the comparable period in 2024.
The reasons for this trend are clearly identifiable. Volatility in equity values; continuous fiscal deficits in major economies; decline in the U.S. dollar; and growing political fragmentation have together produced an environment wherein many argue that the traditional arguments supporting ownership of gold – including its ability to serve as a store-of-value independent of any government’s credit worthiness – are applicable more frequently than when interest rates were near zero and equity markets demonstrated consistent returns.
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