The price of gold hit all-time highs this week.
Falling interest rates and rising geopolitical tensions boost gold's appeal as a safe haven asset.
With gold outperforming stock prices since October 2022, Wall Street expects the rally to continue.
The price of gold has soared this year.
The precious metal hit a record high of $2,772 per troy ounce this week and has risen in six of the past seven weeks.
With year-to-date gains of about 33%, gold returns have outpaced the broader stock market, including the tech-heavy Nasdaq 100, by about 10 percentage points.
And since the bull market in stocks began in October 2022, gold has outpaced equity gains, returning 67% compared to the S&P 500's return of about 63%, according to data from YCharts.
Those superior returns make the metal one of the world's hottest investments.
The largest gold ETF, the SPDR Gold Shares, has $78 billion in assets under management and has seen about $5 billion of inflows in the past six months, according to data from ETF.com.
Physical gold is also having a moment. Costco has consistently sold out of gold bars when they become available on their website and Wells Fargo estimates that Costco sells up to $200 million in gold bars and silver coins to its members each month.
It's been a perfect storm for the yellow metal, and the outlook suggests more gains ahead.
Here's what's going on.
Global central banks have been on a gold-buying spree over the past few years.
According to the World Gold Council, central banks purchased a record 483 tons of gold in the first half of the year. Central banks from Turkey, India, and China topped the list of the biggest buyers.
Part of the surge in demand is from countries that want to diversify their holdings away from the US dollar.
"We believe that the tripling in central bank purchases since mid-2022 on fears about US financial sanctions and US sovereign debt is structural and will continue," Goldman Sachs said in a note last month.
This dynamic has been on display since Russia invaded Ukraine in 2022, as America sought to inflict maximum economic damage on Russia via sanctions. But it's harder to implement sanctions against a country that is less reliant on the dollar, and one way to be less reliant on the dollar is to buy gold.
It is a dynamic that the US should be closely monitoring, according to economist Mohamed El-Erian.
El-Erian wrote in an op-ed for the FT this week that the persistent rise in gold "captures an increasingly persistent behavioural trend among China and 'middle power' countries."