(Reuters) - Gold prices hit a record high for a ninth time this year on Wednesday as fears of a potential global trade war, ignited by U.S. President Donald Trump’s latest tariff threats sent investors scurrying to the precious metal.
Bullion prices scaled an all-time high of $2,946.85 to stand up more than 12% this year, with market bulls eyeing $3,000 an ounce as the next psychological level to breach.
Here are the different ways to invest in gold:
SPOT MARKET
Large buyers and institutional investors usually buy gold from big banks. Prices in the spot market are determined by real-time supply and demand dynamics.
London is the most influential hub for the spot gold market, largely because of the London Bullion Market Association. The association sets standards for gold trading and provides a framework for the over-the-counter market, facilitating trades among banks, dealers, and institutions.
China, India, the Middle East and the United States are other major gold trading centres.
FUTURES MARKET
Investors can also get exposure to gold via futures exchanges, where people buy or sell a particular commodity at a fixed price on a particular date in future.
COMEX (Commodity Exchange Inc), part of the New York Mercantile Exchange, is the largest gold futures market in terms of trading volumes.
The Shanghai Futures Exchange, China’s leading commodities exchange, also offers gold futures contracts. The Tokyo Commodity exchange, popularly known as TOCOM, is another big player in the Asian gold market.
EXCHANGE TRADED PRODUCTS
Exchange-traded products or exchange-traded funds issue securities backed by physical metal and allow people to gain exposure to gold prices without taking delivery of the metal itself. [GOL/ETF]
Exchange-traded funds have become a major category of investment demand for the precious metal.
Physically backed gold exchange-traded funds registered a modest net inflow of $3.4 billion in 2024, their first in four years, even though their holdings fell by 6.8 metric tons, the World Gold Council said.
BARS AND COINS
Retail consumers can buy gold from metals traders selling bars and coins in a shop or online. Gold bars and coins are both effective means of investing in physical gold.
DRIVERS:
INVESTOR INTEREST AND MARKET SENTIMENT
Rising interest from investment funds in recent years has been a major factor behind bullion’s price moves.
Sentiment driven by market trends, news, and global events can fuel speculative buying or selling of gold.
FOREIGN EXCHANGE RATES
Gold is a popular hedge against currency market volatility. It has traditionally moved in the opposite direction to the U.S. dollar, since weakness in the U.S. currency makes dollar-priced gold cheaper for holders of other currencies and vice-versa.
MONETARY POLICY AND POLITICAL TENSIONS
The precious metal is widely considered a "safe haven" during times of uncertainty.
Trump’s threats of trade tariffs, and his imposition of additional duties on Chinese goods, have fuelled fears of a global trade war, rattling currency markets and sparking fears of a spike in U.S. inflation.
On Thursday, Trump said he intended to impose auto tariffs "in the neighbourhood of 25%" and similar duties on imports of chips and drugs, the latest in a series of measures threatening to disrupt international trade.
The policy decisions of global central banks also influence gold’s trajectory. Lower interest rates reduce the opportunity cost of holding gold, since it pays no interest.
CENTRAL BANK GOLD RESERVES
Central banks hold gold in their reserves. Central bank demand has been robust in recent years because of macroeconomic and political uncertainty.
More central banks plan to add to their gold reserves within a year, despite high prices for the metal, the World Gold Council said in its annual survey in June.
Global gold demand, including over-the-counter trading, rose by 1% to a record high in 2024, the World Gold Council said, adding that central banks sped up buying in the fourth quarter.