The outlier performance of investments in gold can be traced to risk-off activity from central banks around the world, according to Karlan Patel, vice-president and exchange-traded fund investment strategist at State Street Investment Management.
“Specifically, it’s Turkey, India, China [and] Poland,” he said during a session at the Canadian Investment Review’s 2025 Investment Innovation Conference. “They’re usually buying about . . . 300 to 400 metric tons of gold per year. The last few years, it’s been over a thousand.”
Patel sees gold as an equity risk hedge rather than an inflation hedge. Indeed, his firm targets an allocation balance between two and five per cent since it can hurt the risk and return dynamics of a portfolio.
Read: Back to basics on gold
Since the 1970s, when U.S. President Richard Nixon ended the gold standard — a monetary value system connecting a country’s currency to gold — the asset has outperformed U.S. treasuries, he said. “You could say gold does almost twice as good as treasuries in a recession.”
As part of a collaborative study with the World Gold Council, Patel interviewed 74 central banks and found 76 per cent of respondents said they intend to have moderately higher or significantly higher allocations to gold over the next five years.
“What excites us the most about gold is what’s happening overseas,” he said, noting gold ETF flows in India have tripled over the past year, alongside long-term cap gains decreasing from 20 to 12 per cent and the import tax line dropping over the last 12 to 18 months.
“If you’re a big pension in India, you hold gold for 13 months and you have favourable taxation.”
In China, a pilot program encouraging the 10 largest insurance companies to explore gold asset allocations was, added Patel. “What we’re seeing from Chinese analysts in the commodity space is they’re projecting an extra 10 to 20 per cent structural price increase in gold.”
In addition to the growing demand from specific countries and central banks, he noted gold is enjoying momentum thanks to a falling dollar value and the role of real yields decreasing typically indicates the price of gold will increase.
Read more coverage from the 2025 Investment Innovation Conference.