Gold’s Persistent Rally Highlights Mounting Market Risks

Gold, a traditional safe-haven asset, often advances when investors question the stability of the financial system. In recent years, its repeated record highs have largely reflected growing concerns over the sustainability of U.S. fiscal deficits and the ballooning national debt—factors that have eroded confidence in the U.S. dollar and Treasury securities as reserve and “risk-free” assets.

Supporting this view, fluctuations in the holdings of the world’s largest gold ETF, the SPDR Gold Trust (GLD), serve as an important barometer of market demand. Historical data reveals that the annual change in GLD holdings has a positive correlation of approximately 0.5 with the 26-week moving average of the CBOE Volatility Index (VIX). This suggests that rising gold ETF holdings often coincide with elevated market anxiety. In practice, when GLD holdings increase—indicating stronger demand for gold—it frequently precedes heightened market volatility, which, if it breaches critical thresholds, may ultimately pressure equities.

Meanwhile, the recent rise in long-term government bond yields across major economies adds another layer of caution for the months ahead.