Hook: Gold has ripped to record highs, yet leading strategists argue that gold is still underowned. That paradox is exactly why many bullion buyers, coin investors, and U.S. allocators see more upside ahead—even after a historic run. As one State Street Investment Management analyst put it in early October, it’s a matter of when, not if, the market tests $4,000 per ounce.
TL;DR: Despite a powerful rally to fresh records above $3,900/oz, multiple data points show room for additional participation: persistent ETF inflows, robust central-bank demand, and shifting Western investor behavior. Meanwhile, the World Gold Council (WGC) reports the strongest first-half investment demand since 2020, with Asia’s bar-and-coin buyers leading—and U.S. retail coin/bar buying still subdued. For investors, that gap is an opportunity, not a red flag.
Why “Gold Still Underowned” Matters Now
When gold vaulted past $3,900/oz in early October, headlines focused on peak prints and profit-taking. But context matters: the breakout overlapped falling real-rate expectations, recurring policy uncertainty, and renewed safe-haven flows—conditions that tend to support sustained strength rather than a blow-off top. Reuters captured the moment: spot hit a record near $3,959 as investors bought insurance against economic and political risks while wagering on further U.S. rate cuts.
In that setting, State Street’s Aakash Doshi emphasized that—despite heavy buying in September—holdings across gold funds remain below their 2020 peak, and earlier this year GLD still saw outflows. Translation: participation isn’t saturated. That’s the heart of the “gold still underowned” thesis.
Expert view (paraphrased from Kitco interview): “The rally has been driven increasingly by investment demand, but positioning isn’t stretched. Gold can grind higher, even if the path is choppy toward $4,000.”
The Market Structure Behind the Rally
Investment Demand Is Doing the Heavy Lifting
The WGC’s Q2 2025 report shows total demand rising 3% year-over-year to 1,249 tonnes, with the value of that demand surging 45% to a record US$132 billion—driven chiefly by robust ETF inflows across consecutive quarters. In other words, investors—not jewelry—are the marginal price setter right now.
Central Banks Are a Persistent Bid
Multiple outlets, including Reuters, detail how central banks have accumulated gold at historically elevated paces since 2022 (even with some moderation this year). Reserve diversification and sanction risk after Russia’s reserve freeze continue to underwrite structural demand.
Asia’s Physical Buyers vs. America’s Slow H1
WGC country data show China and India leading bar-and-coin demand in H1, while U.S. bar and coin demand slumped 53% year-over-year to just 9 tonnes in Q2—the weakest since Q4 2019. That’s an important backdrop: U.S. retail hesitancy can turn into late-cycle catch-up buying if momentum persists.
Gold Still Underowned: Where the Next Buyer Comes From
- Western ETFs: After intermittent outflows earlier in 2025, GLD and peers attracted renewed inflows as the macro set turned more supportive. If new highs normalize, more model portfolios may lift target weights. (See GLD factsheets and issuer pages for current holdings and asset growth context.)
- U.S. retail bullion: Coin/bar investors who trimmed into strength may re-enter on dips, particularly if the Fed embraces a clearer easing path and the dollar tops out.
- Institutional allocators: CIOs who underweighted real assets in the AI-led equity cycle may use a consolidation to add low-correlation ballast. WGC’s work on gold’s portfolio role highlights those diversification benefits.
What the Data Say (and Don’t)
Confirmed by WGC (Q2 2025)
- Investment drove the quarter; ETFs had their strongest inflows since 2020.
- Bar & coin demand posted the strongest first half since 2013, led by Asia.
- Jewelry softened under record prices, especially in China and India.
U.S. Snapshot
- Bar & coin slid to 9t in Q2 (-53% y/y), even as ETF interest revived—evidence that Americans favored convenience exposure over physical in H1 2025.
Price Context
- Spot gold’s record above $3,900/oz occurred alongside fresh geopolitical and policy jitters and rising expectations for rate cuts—classic tailwinds.
Expert Quotes & Perspectives
- Aakash Doshi, State Street Investment Management (paraphrased): Gold is still underowned; $4,000 is plausible over time, but volatility is part of the journey. A friendlier Fed and softer dollar would help.
- World Gold Council strategist (quoted via Reuters): Investors are navigating policy shifts and global politics; gold is performing its role as a store of value amid uncertainty.
Benefits and Risks for Buyers Right Now
Benefits
- Diversification & drawdown defense. WGC research shows gold’s low correlation to stocks and bonds is especially valuable when macro data are noisy and policy credibility is questioned.
- Structural demand tailwinds. Central-bank purchases and revived ETF interest support dips.
- Underownership. If positioning remains light vs. 2020 peaks, incremental inflows can have outsized price impact—especially near new highs.
Risks
- Headline volatility. Sharp retracements can follow record runs, particularly around Fed communications and labor/inflation surprises.
- Real-rate shocks. A hawkish repricing of yields/dollar would likely cap near-term upside.
- Event myopia. Don’t over-attribute moves to a single theme; the mosaic—rates, FX, geopolitics—drives trends.
How to Position: A Practical Playbook
- Define the sleeve. Many diversified portfolios target low- to mid-single-digit allocations to gold, scaling up tactically when real rates fall and policy risk rises. (Institutional frameworks vary—use IPS guidelines.)
- Choose your vehicle:
- Physical (coins/bars): Direct, tangible, low counterparty risk; shop spreads.
- ETFs (e.g., GLD): Liquidity and ease; track holdings and issuer disclosures.
- Minted products vs. generic bars: Eagles/Maples are highly liquid; 10-oz and 100-oz bars often deliver better per-ounce pricing.
- Add with staging. Scale into positions (thirds or quarters) to respect volatility; rebalance after big up-moves.
- Mind the mix with silver. If you can stomach higher beta, a modest silver sleeve can enhance upside in pro-gold regimes. (Silver’s move toward decade highs alongside gold underscores that beta.)
- Stay data-driven. Watch real yields, dollar trends, and ETF flow signals; they tend to lead media narratives.
ETF vs. Physical: Quick Comparison
| Attribute | ETF Exposure (e.g., GLD) | Physical Coins/Bars |
|---|---|---|
| Liquidity | High, intraday tradable | High at reputable dealers; settlement time varies |
| Costs | Expense ratio; trading commissions | Premiums over spot; storage/insurance |
| Custody Risk | Fund/trust structure | Self-custody or third-party vault |
| Taxes | 28% collectibles rate in U.S. (check specifics) | Same rate for physical; consult tax advisor |
| Use Case | Tactical/strategic allocation | Long-term wealth reserve / portability |
Tip: Many U.S. investors blend both: a core physical base for resilience plus ETF “top-ups” for tactical flexibility. Check issuer factsheets and audited reports for transparency.
Gold Still Underowned: What Could Change the Narrative?
- A clearer Fed pivot. If rate cuts come through faster than expected, real yields fall and gold’s carry penalty shrinks—pulling in late allocators.
- Fiscal concerns. Deficit/debt headlines can keep a support bid under gold as investors hedge policy credibility risk.
- ETF leadership. Sustained inflows would confirm Western participation catching up to Asia’s physical demand, reinforcing the “underowned” thesis.
Case Study: H1 vs. H2 2025 Behavior
- H1 2025: Asia’s bar & coin buyers (China, India) absorbed record prices; U.S. bar & coin demand fell—just 9t in Q2 (-53% y/y), even as ETFs stabilized. l
- H2 2025: Momentum and macro drivers pushed spot above $3,900; media attention broadened, and ETF participation rose—the classic late-cycle Western catch-up pattern.
FAQs
1) If gold is at records, isn’t it “overowned”?
Not necessarily. Fund holdings remain below 2020 peaks, and U.S. retail bar-and-coin demand is still soft compared to Asia—evidence of underownership, not excess.
2) Will gold reach $4,000?
Strategists argue the path is plausible as real rates ease and policy uncertainty lingers, but expect volatility on the way.
3) Should I buy ETFs or physical?
Both have roles. ETFs offer ease/liquidity; physical provides tangible, no-counterparty ownership. Many investors blend the two. Review factsheets/holdings and compare spreads.
4) What about central-bank buying—still a driver?
Yes. While pace can ebb and flow, official-sector buying remains structurally strong in the post-sanction era.
5) Is U.S. demand really that weak?
For Q2 2025, yes: bar and coin demand fell to 9t, -53% y/y—lowest since Q4 2019—even as ETFs improved. That’s part of the opportunity as sentiment turns.
Conclusion: Underowned, Not Over
The gold still underowned narrative rests on facts, not feelings: record prices alongside sub-peak fund holdings, Asia-led physical demand, and a delayed Western retail response. With macro tailwinds (rate-cut expectations, fiscal worries, geopolitical uncertainty) still in place—and with gold’s portfolio diversifier role well documented—the case for a disciplined allocation remains intact. Use volatility to your advantage: scale into positions, blend physical with ETFs as appropriate, and let real-rate trends—not headlines—steer your long-term plan.