How gold became one of the world’s favorite assets

Author: Ivan Castano, For CME Group

AT A GLANCE

For the past 50 years, Gold futures have served as the global benchmark for gold pricing.
Gold is “poised to maintain its importance in the financial world” says Jin Hennig, global head of Metals at CME Group.

“Gold is a chameleon as a financial asset. It suits different macro perspectives and different macro dynamics at different times.” That’s how Elise Backman, a commodity investor at Wellington Management, described the factors driving the precious metal’s continued popularity.

“We are in a period of shorter and more volatile macro changes,” Backman said. “Gold is really good at acting as a defense when the timing of macro cycles is uncertain. That’s why it’s a critical asset across portfolios, including ours.”

As the metal’s “financialization” has deepened, its buyer pool has become much larger and diverse, Backman noted.

“One day you might have central banks coming in to buy gold, the next day you might have ETFs … or future buyers,” she said.

Backman highlighted a few milestones driving gold to become the asset it is today. The Great Financial Crisis, for instance, was a big one, fueling a gold bull run in the early 2000s, she noted. More recently, a global de-dollarization phenomenon stemming from the Russia-Ukraine war, coupled with changing U.S. policy around how the dollar is orchestrated, are driving today’s purchases from more traditional buyers.

Futures Act as Price Benchmark

Gold futures, meanwhile, have long acted as a global price benchmark.

“In the dynamic world of finance, gold stands as one of the oldest and most reliable assets,” said Jin Hennig, global head of Metals at CME Group. “For the past 50 years, Gold futures have been at the forefront of price discovery, serving as the global benchmark for gold pricing. Gold’s quality and universal appeal have made it a mainstay in investment portfolios worldwide.”

Amid this backdrop, roughly $63 billion in notional value of gold is traded daily across the entire Gold futures product line, according to CME Group data. Gold futures at CME Group provide unmatched liquidity and market depth to boost trading efficiencies for market participants globally.

The chart from CME Group illustrates the trends in their Gold Product Suite from 2009 to 2024, showing both the Average Daily Volume (ADV) and Average Daily Open Interest (ADOI). The ADV, represented by the dark bars, shows a general upward trend with notable peaks around 2019 and 2020, followed by a dip and a subsequent rise in 2024. The ADOI, depicted by the blue line, follows a similar pattern, peaking around 2019, then declining, and showing signs of recovery by 2024. Overall, the chart indicates fluctuations in gold trading activity over the years, with a recent resurgence in interest and volume.

“CME is an extremely important aspect of the gold business,” said Dennis Suskind, a member of the CME Group Board of Directors, adding that the exchange began offering Gold futures in 1974, which allowed Americans to trade the yellow metal after they were banned from owning gold many years prior.

“Gold has a special place in the world,” added Suskind. “People in the 60s, 70s and 80s would use [it] as a substitute for anything—inflation, deflation—it was the way to hedge anything that you had; it was a stable commodity, it was a store of value, [and] you could convert it to dollars anytime you wanted to very easily.

“There is nothing else in the world that is a substitute for gold.”