Gold rally: Why experts say precious metals boom has only just begun
World Gold Council says the rally is still in early stages as analysts lift their forecasts to $US5,000.
Fuelled by the latest flare up in the US-China trade war and dovish signals from the US Federal Reserve, precious metals continue their blistering rally with no end in sight.
Gold hit a record high of $US4,190.97 per ounce on Wednesday, having risen 60 per cent this year, while silver has jumped 86 per cent to $US52.22, making precious metals the best performing asset.
While investors hit pause on stocks, precious metals took off again as US President Donald Trump threatened 100 per cent tariffs on China over its rare earths restrictions, reminding investors of one of the key reasons why they've been hoovering up buying precious metals for the past three years.
The question on everyone’s lips: is this a trend or a turning point?
Major investment banks are betting the rally has further to run.
BofA and Societe Generale recently lifted their end-2026 forecasts to US5000 an ounce, while Goldman Sachs sees gold reaching US$4,900 and others are probably due to update their forecasts.
“With ETF flows remaining strong, central-bank buying expected to be resilient, we feel confident and compelled to update our target prices,” SocGen analysts said. “We now see prices reaching $US5000/oz by the end of 2026, as the rate of flows has surpassed our initial assumptions.”
BofA analysts saw a further lift in investment demand, boosting gold through 2026.
Meanwhile, a new report from the World Gold Council suggests the bull market in gold may still be in its early stages compared to previous bull runs.
John Reade, the council’s senior market analyst for Europe and Asia, points out that gold’s climb from US$3,500 to US4000 took just 36 days – far quicker than the average 1,036 days between prior $US500 incremental milestones.
Yet physically backed gold exchange traded funds have only added 634 tonnes year to date, leaving total holdings at 3857 tonnes – still 2 per cent below the November 2020 peak.
“We are likely in the early innings of the next accumulation phase,” Reade said.
Previous gold ETF bull runs lasted 221 and 253 weeks, adding 1823 and 2341 tonnes respectively.
The current run that began in May 2024 has seen holdings increase just 788 tonnes over 74 weeks.
“Compared to the averages of prior runs, this represents only 30 to 40 per cent of the total,” Reade said.
The WGC sees several key drivers behind this year’s surge: strong investment demand amid geopolitical tensions, dollar weakness, expectations of further Fed rate cuts, and growing fears of an equity and bond market correction. Central bank buying has also played a supporting role.
The comparison to gold’s spectacular 1979 rally has generated buzz among investors.
But Reade cautions against reading too much into single-year performance.
“It’s not just gold’s performance in a single year, but the length and underlying drivers of a bull run that should be the centre of attention,” he said.
Gold’s recent run remains below the average duration and magnitude of previous bull runs.
Still, the rapid price rise poses some near-term risks.
The price of gold and other precious metals soars, institutional investors may rebalance their portfolios as the value of precious metals hits target allocations.
Technical indicators suggest an overbought market that could trigger profit taking.
Gold is now trading about 20 per cent above its 200-day moving average. A similarly sharp rise preceded a 10 per cent fall in April-May and sideways trading until September.
A sharp dollar rebound or resolution of geopolitical tensions could also prompt a reversal.
Consumer demand is likely to suffer too.
“The rapid gold price increase will likely dampen consumer demand during an otherwise strong seasonal period,” Reade said.
But the council remains optimistic about gold’s long-term outlook.
“There are reasons to believe that gold’s run has not run out of steam,” Reade says.
He points to high real interest rates, tight credit spreads and lofty stock markets.
A broader investor base, secular US dollar weakness, persistent policy uncertainty and rising geopolitical tensions all support continued demand for precious metals.
“In summary, gold’s strategic strengths continue to balance the tactical risks as this new stage unfolds,” Reade said.
For investors who’ve missed the rally so far, any pullback would be a welcome buying opportunity.
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