Gold's Historic Rally Exposes Persistent Under Allocation Among U.S. Investors

Despite gold's ascent to successive all-time highs in 2025 and new all-time highs being made today, American institutional and retail investors have maintained remarkably tepid exposure to the precious metal, presenting what Goldman Sachs analysts characterize as a significant structural opportunity for continued price appreciation.

Gold ETF holdings among U.S. investors remain six basis points below their 2012 peak—a deficit that has persisted since these investment vehicles first launched in the mid-2000s, according to Goldman's analysis published Wednesday. The divergence stems from a fundamental mathematical reality: aggregate portfolio growth has comprehensively outpaced both gold price appreciation and trading volume expansion over the past decade, Goldman's analysts noted.

The magnitude of under allocation is striking. Gold ETFs constitute a mere 17 basis points—or 0.17%—of private U.S. financial portfolios as of Q2, representing an infinitesimal fraction of the approximately $112 trillion Americans hold in equities and fixed income securities, Goldman's research indicates.

Institutional reluctance proves equally pronounced. Fewer than half of major U.S. institutions managing assets exceeding $100 million maintain any gold ETF exposure whatsoever, according to Goldman's data. Among those that do, allocations typically cluster between 10 and 50 basis points. Even sophisticated long-term institutional investors average only 20 basis points of portfolio allocation to gold.

The Allocation-Recommendation Dichotomy

This minimal positioning creates a notable disconnect with prevailing sell-side sentiment. Major financial institutions including Citi, UBS, Morgan Stanley, and BlackRock have issued recommendations advocating increased gold allocations. Bridgewater Associates founder Ray Dalio has similarly championed the metal as a strategic portfolio component amid macroeconomic uncertainty.

Goldman's analysts identify this gulf between Wall Street guidance and actual investor positioning as a potential catalyst for gold's next appreciative phase—contingent upon U.S. investors beginning to act on the recommendations they're receiving.

Stable Coin Kingpin Tether Has Goals of Capitalizing on the Current Gold Rush

Tether—the world’s largest cryptocurrency stablecoin issuer—announced the launch of Scudo, a new unit of account for its gold-backed token Tether Gold (XAU₮), designed to enhance the metal's utility as a medium of exchange rather than merely a store of value.

To understand how big this is, consider Tether’s position as the third largest cryptocurrency by market capitalization with a total market cap of $187 Billion.

The initiative coincides with gold's 2025 rally, driven by persistent inflationary pressures, elevated interest-rate uncertainty, record central bank accumulation, and robust safe-haven demand. As investors increasingly prioritize purchasing power preservation, Tether contends conditions favor restoring gold's historical function as a transactional medium—a role it fulfilled throughout most of recorded economic history before the widespread adoption of fiat currencies.

The practical impediment Tether seeks to address involves the inherent complexity of pricing and transacting in fractional troy ounces, which frequently necessitates unwieldy decimal calculations ill-suited for commercial applications.

Scudo establishes one unit as equivalent to one-thousandth of a troy ounce of gold (or of an XAU₮)—a denominated approach analogous to Bitcoin's "Satoshi" subunit. By enabling transactions in whole or partial Scudo units rather than decimal fractions, Tether Gold aims to enhance the metal's practical utility beyond its traditional role as a wealth preservation vehicle. Commercial goods and services can be priced in Scudos rather than fractional ounces, potentially facilitating gold's reintegration into routine economic activity.

The dual developments—persistent institutional under allocation and enhanced transactional infrastructure—suggest gold's 2025 rally may reflect only partial recognition of the metal's evolving role in diversified portfolios and the broader monetary system. So, with new records in silver and spot gold being made today, the rally in the precious metals, (for now) seems limitless. 

Wishing you as always good trading,