(Kitco News) – Gold’s historic run is gaining momentum, and investors are taking notice. Spot gold hit multiple new record highs and surged past $2,880 per ounce this week, inching closer to the critical $3,000 threshold. The rally has been driven by record central bank demand, geopolitical uncertainty, tariff fears, and a seismic shift in capital flows.
Veteran money manager Adrian Day, CEO of Adrian Day Asset Management, says this is just the beginning.
“I wouldn’t be surprised at all to see $3,500 to $4,000 within the next 12 months,” he told Kitco News. “Gold is moving up in the face of a strong dollar, so when the dollar turns, we could see a dramatic move higher.”
Why is gold surging? Smart money knows something
According to the World Gold Council’s latest report, global demand hit a record 4,974 metric tonnes in 2024, marking the third consecutive year central banks have purchased over 1,000 tonnes. The largest buyers include China, Poland, and Turkey, as nations seek to diversify away from the U.S. dollar amid concerns over economic and geopolitical risks.
Day points to this trend as a key driver behind gold’s strength.
“The main driver of gold for the last two years has been central banks,” he said. “They’re moving away from dollars in their reserves because of dollar weaponization. And this is accelerating, not slowing down.”
But it’s not just central banks. Investors worldwide are treating gold as an economic hedge. U.S.-China trade tensions are escalating after President Trump imposed new tariffs on Beijing, with China retaliating. The risk of a prolonged trade war as well as tariffs potentially being slapped on precious metals, has sent shockwaves through markets, pushing gold lease rates in London as high as 12%, a sign of extreme short-term tightness.
“Gold is a hedge against monetary chaos, and that can mean inflation, deflation, or recession,” Day explained. “And right now, we’re facing elements of all three.”
Wall Street is absent – but that’s about to change
Despite gold’s 27% surge in 2024, North American retail investors have yet to join the rally. Gold ETFs, like GLD, have seen almost no inflows, and gold stocks remain under-owned by generalist investors.
“The GDX and GDXJ had zero days of net inflows in January,” Day revealed. “This is astonishing. Gold stocks are up 47% in the last year, and yet gold mutual funds and ETFs are still seeing outflows.”
This disconnect presents a unique opportunity for those ahead of the curve. Historically, gold mining stocks have outperformed during gold bull markets, but this time, they’ve lagged behind.
“Margins for gold miners are expanding because gold is rising faster than their costs,” Day said. “Every analyst asks about costs, but no one is talking about the fact that miners are making more money than ever.”
For investors looking to capitalize, Day points to Agnico Eagle (AEM), Franco-Nevada (FNV), and Wheaton Precious Metals (WPM) as top plays.
“Agnico is the best-run major mining company in the world,” he said. “If you don’t own it, I’d close my eyes and buy it.”
The next phase of gold’s rally
While some analysts argue goldd is overdue for a pullback, Day believes structural forces will continue driving prices higher. One major catalyst? The growing risk of stagflation.
“Look at the last five months—CPI, PCE, all of it is trending up,” he warned. “The stock market is weakening, inflation is stubborn, and debt levels are unsustainable. That’s a textbook setup for gold.”
With global capital moving fast and central banks hoarding gold at record levels, Day sees a clear path to higher prices.
“We’re at the overture,” he said. “The curtain is about to go up on this gold market, and most investors still aren’t paying attention.”
For the full interview and deeper insights into where gold could be heading next, watch Adrian Day’s full conversation with Kitco News below.