LONDON (Reuters) - Investors seeking shelter from political and economic volatility triggered by the new U.S. administration are increasingly moving into gold Exchange-Traded Funds, adding momentum to the market's record rally.

Since U.S. President Donald Trump took office in January, his radical policy shift, including trade tariffs, comments he aims to annex Greenland and his unconventional approach to diplomacy to try to end the war in Ukraine have driven gold prices to successive records.

Initially an influx into gold exchange-traded funds, or baskets of securities that trade like a stock, was dominated by European investors, but analysts say the policy upheaval has begun to tempt even U.S. investors who historically have favoured equities.

On Friday, gold hit its latest record, at $3,004.86 an ounce, a gain of 14% since the start of 2025, following 27% growth in 2024.

Gold holdings in Europe-listed exchange-traded funds, meanwhile, have increased by 46.7 metric tons, a rise of 3.6%, to 1,334.3 tons since the start of 2025, a contrast to the 2021-2024 period that was marked by big outflows, according to the World Gold Council (WGC).

Further inflows could provide support as the market moves further into overbought territory.

"Investors, such as real money managers, especially those located in the West needed a growth and stock market scare big enough to persuade them back into gold. That is what we are seeing," said Ole Hansen, head of commodity strategy at Saxo Bank.

"Since 2022 when the Federal Reserve began its rate-hiking cycle, these investors left gold... but with the other markets now showing signs of suffering and the potential for even lower funding rates in the future, they have returned."

U.S. retail investors have become wary of stock markets after Monday's sell-off when the benchmark S&P 500 index registered its biggest drop this year. Analysts say that adds to demand for gold as a refuge from turbulence.

"In the U.S., some investors may be less concerned despite similar global risks, possibly due to stronger confidence in the domestic economy," Alexander Zumpfe, a precious metals trader at Heraeus Metals.

"However, recent inflows into North American gold ETFs indicate that interest in gold as a hedge is also growing in the U.S."

In the United States, gold holdings in ETFs have climbed 68.1 tons, a gain of 4.3%, to 1,649.8 tons so far this year.

EQUITIES' LOSS COULD BE GOLD'S GAIN

Saxo's Hansen said Trump's policies have triggered a retreat from U.S. stocks, which for years attracted large amounts of investor cash, and that gold could be a beneficiary, at least in the short term.

Apart from the investor-led flow into exchange-traded funds, retail investors the world over are hungry for exposure to gold.

The number of people buying gold for the first time on BullionVault's online market jumped in February to the highest since May 2021, said Adrian Ash, head of research at London-based BullionVault.

Gold investor demand at BullionVault exceeded customer profit-taking by 0.2 tonnes, the highest since June 2023, Ash said.

While supportive of the market, however, even all this may not drive the gold price higher, analysts say, given the signs the market is overbought.

To stay above the $3,000 per ounce mark, gold would need to see retail bar and coin demand in Europe and North America to step up further and/or central bank buying intensify, said John Reade, senior market strategist at WGC.

So far, only demand for physical gold bars and coins is rising in Germany this year after a slump of recent years.

(Reporting by Polina Devitt; Editing by Pratima Desai, Veronica Brown and Barbara Lewis)