Gold Has Lost Its Mojo. Here’s Why It Should Come Back.

Gold is up more than 25% this year but you wouldn’t know it from recent performance. (DAVID GRAY/AFP via Getty Images)

Gold’s rally appears to be sputtering. But there’s still plenty of political uncertainty, and with surging demand from central banks and Main Street investors, the metal may still have room to run.

Gold is up more than 25% so far this year, but you wouldn’t know it from its recent performance. Prices for front-month Comex gold futures fell for four consecutive days through Monday, their longest losing streak since December. While gold was up about 0.5%, or $17, to $3,327 an ounce on Tuesday, it remains nearly 4% below its record high of $3452.80 on June 13.

Still there’s a good chance gold can regain its mojo, argues Bloomberg commodities strategist Mike McGlone in a note Tuesday.

“Central banks are accumulating gold and ETFs have shifted to significant inflows, which could help keep the metal on pace to above $3,500 by year-end,” he wrote. “Trump administration pushback on Federal Reserve independence and tariffs are gold tailwinds.”

Gold’s current rally began in 2022, largely because of major buying by global central banks after the U.S. froze Russia’s assets following the invasion of Ukraine. The U.S. move spooked foreign policymakers who decided they needed to reduce their reliance on dollar-denominated assets like Treasury bills. The buying hasn’t slacked off. Central banks bought a net 20 tonnes of gold in May, the latest data available according to the World Gold Council, up from 11 tonnes in April.

Meanwhile, after years on the sidelines, U.S. retail investors have also started getting in on the act. In 2024, despite the fact gold returned 26%, investors poured a net of just $366 million into the SPDR Gold Shares , the largest gold ETF, according to FactSet. This year, they have been buying hand over fist, pouring more than $8.5 billion into the fund.

One reason gold is stuck in place may be that investors’ attention is focused on risk assets, such as U.S. stocks and cryptocurrencies such as Bitcoin, argues McGlone. Given the Trump administration’s unpredictability, that may reflect a degree of complacency.

President Donald Trump reached a trade deal with leaders of the European Union this weekend, reassuring investors he didn’t plan to pursue a destructive trade war. Yet, many details of the deal are still unclear, and observers are questioning whether Europe will really make good on its pledges to buy U.S. energy and other goods. Meanwhile, dozens of other countries, including China, are still in the process of negotiating their own pacts.

Trump has also spent the past several weeks ramping up his spat with Federal Reserve Chairman Jerome Powell. A true showdown would almost certainly rattle markets, strengthening the bull case for gold, which many investors see as a last-resort safe haven asset.

Any weakening confidence in the U.S. economic system could also further erode the value of the dollar, which is already down about 7% in 2025, especially if the Fed also ends up cutting interest rates as Trump has been demanding.

A weaker dollar tends to provide a tailwind for gold. Since gold is priced in U.S. dollars, the weaker dollar makes it less expensive for foreign buyers to own gold. Lower U.S. interest rates would also make gold more attractive, since gold competes with Treasuries for investor dollars.

Write to Ian Salisbury at ian.salisbury@barrons.com