Investors around the world put nearly £3bn into gold at the end of July in what was the second largest weekly sales figure for funds investing in the previous metal.
The figures, from Bank of America, were published as the gold price reached a record high of $2,070 (£1,555) per ounce, driven by investor caution and fears over inflation. Analysts expect the price to keep rising despite its ascent into uncharted territory.
Norman Villerman, of wealth manager UBP, said gold could be in the early stages of a “bull market” that could last several years.
He said: “Even with a vaccine, governments will need to spend money to reshape economies. This will provide a catalyst to investors to keep buying more gold and silver.”
He said American and European governments would ramp up economic stimulus in 2021 in order to avoid deflation, as Japan experienced after its interest rates hit rock bottom more than 30 years ago.
Inflation, or the fear of inflation, pushes the gold price higher as it reduces the buying power of traditional currencies such as the pound or dollar. Gold, on the other hand, can hold its value as there is limited supply.
Lower interest rates also affect the price of the precious metal. When the yields from cash or low-risk government bonds are high, the appeal for gold, which yields nothing, diminishes. The reverse is also true, and low or negative yields push safety-seeking investors towards gold, driving up its price.
The outlook for gold is linked to the strength of the dollar. A weaker dollar, as we have seen recently, tends to boost bullion, which is seen as a store of value. The American central bank is undertaking the world’s largest bond buying programme, which is expected to weaken its currency.