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By Polina Devitt
LONDON (Reuters) - Investors seeking shelter from political and economic volatility triggered by the new U.S. administration are increasingly moving into gold Exchange-Traded Funds, adding momentum to the market's record rally.
Since U.S. President Donald Trump took office in January, his radical policy shift, including trade tariffs, comments he aims to annex Greenland and his unconventional approach to diplomacy to try to end the war in Ukraine have driven gold prices to successive records.
Initially an influx into gold exchange-traded funds, or baskets of securities that trade like a stock, was dominated by European investors, but analysts say the policy upheaval has begun to tempt even U.S. investors who historically have favoured equities.
On Friday, gold hit its latest record, at $3,004.86 an ounce, a gain of 14% since the start of 2025, following 27% growth in 2024.
Gold holdings in Europe-listed exchange-traded funds, meanwhile, have increased by 46.7 metric tons, a rise of 3.6%, to 1,334.3 tons since the start of 2025, a contrast to the 2021-2024 period that was marked by big outflows, according to the World Gold Council (WGC).
Further inflows could provide support as the market moves further into overbought territory.
"Investors, such as real money managers, especially those located in the West needed a growth and stock market scare big enough to persuade them back into gold. That is what we are seeing," said Ole Hansen, head of commodity strategy at Saxo Bank.
"Since 2022 when the Federal Reserve began its rate-hiking cycle, these investors left gold... but with the other markets now showing signs of suffering and the potential for even lower funding rates in the future, they have returned."
U.S. retail investors have become wary of stock markets after Monday's sell-off when the benchmark S&P 500 index registered its biggest drop this year. Analysts say that adds to demand for gold as a refuge from turbulence.
"In the U.S., some investors may be less concerned despite similar global risks, possibly due to stronger confidence in the domestic economy," Alexander Zumpfe, a precious metals trader at Heraeus Metals.
"However, recent inflows into North American gold ETFs indicate that interest in gold as a hedge is also growing in the U.S."
In the United States, gold holdings in ETFs have climbed 68.1 tons, a gain of 4.3%, to 1,649.8 tons so far this year.
EQUITIES' LOSS COULD BE GOLD'S GAIN
Saxo's Hansen said Trump's policies have triggered a retreat from U.S. stocks, which for years attracted large amounts of investor cash, and that gold could be a beneficiary, at least in the short term.