Why Gold Skyrocketed This Year—and Why Its Price May Be Permanently Higher

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The S&P 500 rose 0.46% yesterday to reach a new all-time high of 6,909.79. The index has gained 17.48% so far this year. With just the quiet Christmas week remaining before year-end, investors will likely note this as a strong year—unless they know someone who bought gold at or before the start of 2025. Gold prices have surged an eye-popping 71% year-to-date, currently hovering around $4,514 per troy ounce. That friend is now chuckling at you, the stock investor who wasted money on fleeting picks like the Magnificent Seven.

A clichéd story explains gold’s rally: this year brought volatility from former President Trump’s tariffs disrupting global trade, Russia’s ongoing Ukraine invasion, fears of an AI tech stock bubble, Bitcoin’s flat performance (down 7% this year), rising inflation, and gold’s role as a safe haven for jittery investors hedging against all those risks.

In reality, that’s only half the story, according to Erb and Harvey of Duke University’s Fuqua School of Business. They argue the 2004 launch of gold exchange-traded funds (ETFs)—which make buying gold as simple as purchasing stocks—has permanently lifted gold prices.

“North American gold ETFs hold nearly $200 billion in assets, while ETFs outside the U.S. add another $175 billion in gold,” they noted in an October 2025 research paper.

This chart illustrates the clear impact of gold ETFs on gold prices. It displays the “real” gold price, which adjusts for inflation:

The more recent rollout of tokenized gold stablecoins—crypto tokens tied to gold reserves (and thus pegged to gold prices) that can be staked or locked as investments in other risk assets like bonds—will likely drive prices even higher, they add.

But don’t get carried away.

Erb and Harvey contend gold isn’t a strong long-term inflation hedge. Gold prices are highly volatile, while inflation is a low-volatility trend. Investors targeting inflation-beating returns with gold may face years of losses:

Then there’s gold’s overall nominal-dollar performance compared to stocks. This chart tracks gold prices over the past 40 years—note that gold can spend years in extended price slumps:

Here’s the Comex continuous gold contract versus the S&P 500 over the last 20 years—clearly, gold isn’t the victor:

Has gold peaked? No one can say for sure. But it’s notable that investment banks like Société Générale, , and have all grown their precious metals trading teams this year, while other banks are exploring reentering the gold vault storage business.

Below is a market snapshot ahead of New York’s opening bell this morning:

  • S&P 500 futures were unchanged this morning. The index closed up 0.46% in the previous session to hit a new record of 6,909.79.
  • STOXX Europe 600 rose 0.39% in early trading.
  • The U.K.’s FTSE 100 dipped 0.12% in early trading.
  • Japan’s Nikkei 225 fell 0.14%.
  • China’s CSI 300 gained 0.29%.
  • The South Korea KOSPI declined 0.21%.
  • India’s NIFTY 50 was down 0.14%.
  • Bitcoin traded at $87,000.