Gold ETFs surge: investors flock to precious metals as crypto falters

Gold’s impressive run, having breached the $3,000 mark for the first time last week, has prompted calls for even greater upside potential.

Jeffrey Gundlach, CEO of DoubleLine Capital and widely known as the ‘Bond King’ for his deep expertise in fixed-income markets, believes that the rally is far from exhausted and anticipates that the precious metal could climb as high as $4,000, signifying a major shift in how investors view inflation hedges.

Speaking during a macroeconomic outlook presentation titled ‘Not in My Neighborhood’, Gundlach highlighted gold’s sustained price momentum alongside other commodities, pointing towards a broader trend of investors seeking refuge in hard assets.

Cryptocurrencies backed by gold, including PAXG and XAUT, have been direct beneficiaries of this historic price surge, offering investors a digital way to access the precious metal’s gains.

“I think gold will make it to $4,000. I’m not sure that’ll happen this year, but I feel like that’s the measured move anticipated by the long consolidation at around $1,800 on gold,” Gundlach said, underscoring his strong conviction in gold’s future performance.

Gold-backed crypto outperforms: a flight to safety?

Gold-backed cryptocurrencies have been significantly outperforming the wider cryptocurrency market so far this year, demonstrating a flight to safety among investors seeking stability amid volatile market conditions.

While PAXG and XAUT are up roughly 14% year-to-date, Bitcoin has dropped 11.4% over the same period, and the broader CoinDesk20 Index has retreated by over 25%, underlining the stark contrast in performance.

Gold ETFs last week have surpassed bitcoin ETFs in assets under management.

Central banks fuel the rally: reversing a dwindling trend

Gundlach’s bullish prediction is rooted in shifting strategies among global central banks, who have been increasingly adding to their gold reserves, reversing a previous period in which their holdings were shrinking.

The total amount of gold held globally, according to IMF data presented by Gundlach, has climbed from a low of around 34 billion Special Drawing Rights (SDR) in 2010 to 40.9 billion SDR, reaching levels last seen between 1975 and 1980, highlighting a renewed interest in gold as a reserve asset.

Special Drawing Rights are an international reserve asset the IMF created back in 1969, defined through a basket of currencies.