Gold prices hit a record high. What's behind the surge?

Shoppers are flocking to Costco for gold bars but they're hardly the only ones scooping up the precious metal.

Investors drove gold prices to a record high on Friday, the latest surge in a 17% rally so far this year. Over that period, bullion prices have climbed more than twice as fast as the S&P 500, the index that most people's 401(k)'s track.

The price gains stem from a wider trend of investors seeking out high-return assets in anticipation of interest rate cuts expected later this year, some experts told ABC News.

A so-called momentum trade has also pushed prices higher, they added, since investors see the price of gold swell and want to share in the gains.

"We're seeing a situation where people are actually increasing their risk exposure," Campbell Harvey, a professor at Duke's Fuqua School of Business who studies commodity prices, told ABC News, noting that the typical price volatility of gold resembles that of the S&P 500.

"You see things like the S&P 500 going up and bitcoin going up," Harvey added. "Gold is part of that."

Costco has generated an estimated $100 million to $200 million per month in gold bar sales, Wells Fargo said in a recent equity research note.

While the price is not disclosed online to nonmembers, the product typically sells for nearly 2% above the spot price, which as of time of publication stood at $2,430 per ounce.

The buying spree has also taken hold at central banks, UBS said in a report last week, citing some central banks' desire to move away from U.S. dollars and hedge against inflation risks.

In January and February, central banks purchased about 64 metric tons of gold and China imported 132 metric tons from Switzerland, a gold-refinery stalwart, UBS said.

Hedge funds and other institutional investors have also bought into the gold craze in an effort to capitalize on the commodity's blistering rise, Campbell said. "That institutional pressure is pushing the price of gold up," he added.

Gold prices have surged despite low activity in a key instrument for everyday investors: ETFs.

An ETF amounts to a bucket of securities that gives investors a way to bet that an underlying asset will increase in price without purchasing that asset.

Related Stories

An ETF for gold, in turn, allows individuals to put money on the price movement of the precious metal rather than buy, lug and store the physical item.

Over the last 10 months, however, gold ETFs have incurred a net outflow of funds, meaning that on the whole the ETFs are losing investment rather than gaining it, Harvey said. That trend, he added, suggests retail investors are not a major cause of the price increase.

Gold is also widely viewed as a hedge against geopolitical unrest because the millennia-old store of value is perceived as an investment that could outlive calamity.

World Gold Council, a United Kingdom-based trade association for the gold industry, said global disruption could drive up prices this year, according to a January report.

"In addition to monetary policy, geopolitical uncertainty is often a key driver of gold demand and in 2024 we expect this to have a pronounced impact on the market," the World Gold Council report said.

For his part, Harvey cast doubt on the role of geopolitics in the price surge, since the onset of the rally did not coincide with the outbreak of the Israel-Gaza war in October.

Investors aiming to put money in gold can do it in a variety of ways. In addition to purchasing the gold bars on offer at some stores like Costco, investors can put funds into a variety of gold ETFs or buy shares in gold mining companies.

Individuals can also invest in gold futures, contracts to buy or sell gold on an agreed-upon date, which essentially amount to a bet on the movement of the price.

Investors should beware, however, Harvey said, noting that bullion typically generates modest returns over the period following an all-time high. UBS expects the price of gold to tick up to $2,500 by the end of the year, according to its report last week.

"Investing at an all-time high is very risky," Harvey said.

Reporters at Good Morning America contributed to this report.