What to Expect After Gold’s Surge Above $4,400

Core Viewpoint - Gold prices have reached a historic high of over $4,400 per ounce, marking a 68% increase in 2025, driven by falling interest rates, a weaker dollar, geopolitical tensions, and significant central bank buying [1][2][3]. Group 1: Market Drivers - Falling interest rates and a weaker dollar are making gold more attractive, as lower rates reduce the opportunity cost of holding gold [1]. - The U.S. dollar is experiencing its largest annual decline since 2017, which enhances global demand for gold as it becomes more affordable for foreign buyers [1]. Group 2: Geopolitical Factors - Rising geopolitical tensions, including trade uncertainties and military actions, have reinforced gold's status as a safe haven asset, leading to increased investments in gold-backed ETFs and central bank purchases [2]. Group 3: Central Bank Activity - Central banks have become structural buyers of gold, with global official gold holdings reaching nearly 36,200 tonnes, up from around 15% of total reserves two years ago to close to 20% now [3]. - This long-term holding by central banks reduces available supply and provides support during price consolidations, reflecting a reassessment of currency risk [3]. Group 4: Future Predictions - The World Gold Council anticipates a period of consolidation in 2026, with gold prices influenced by growth, inflation, and interest rates [4]. - Various scenarios suggest that in a downturn, gold could outperform sharply, while stronger U.S. policies may pressure gold prices due to higher interest rates [5].