Gold has broken through fresh records above $3,600 an ounce, drawing investors into one of the most powerful rallies in decades. The surge reflects a confluence of central bank buying, expectations of Federal Reserve rate cuts, geopolitical tensions and the metal’s appeal as a hedge against weakening confidence in US assets. Analysts and traders are now asking whether the momentum could push prices as high as $5,000 an ounce, a level flagged by Goldman Sachs if investors lose faith in Fed independence.
Chris Weston, head of research at Pepperstone, says the rally cannot be pinned to a single factor. “Emerging-market central banks increasing gold as a share of reserves, the erosion of US dollar purchasing power, a hedge against US economic fragility, policy uncertainty, they all could be true,” he notes. Systematic funds have also played a part, piling into gold futures as prices gained strength. “What is key is that gold is uncorrelated to the S&P 500 and US Treasuries, and that makes it attractive for multi-asset managers looking to reduce variance in portfolios,” Weston adds.
Central banks at the core of demand
One of the strongest drivers has been sustained central bank buying. Since late 2022, the share of gold in official reserves has risen from 14.8% to 23.7%, according to Pepperstone’s data. China, in particular, has consistently accumulated, providing a floor under the market. The World Gold Council’s recent updates show central banks collectively buying hundreds of tonnes, continuing a trend that has underpinned gold through bouts of dollar strength and higher bond yields.
The $5,000 question
Goldman Sachs analysts have suggested that prices could eventually climb to $5,000 if confidence in the Fed collapses. That would echo the 1970s, when inflation and political interference triggered a steep dollar decline and a rush into bullion. Weston sees this scenario as low probability, but not impossible.
“If we saw clear evidence that Trump had an oversized reach on Fed policy, then gold would fly and possibly trade to $5,000 over time,” he says, though he argues markets would “take their pound of flesh” if the Fed veered too far from economic realities.
Traders vs. long-term investors
The question for market participants is whether it is too late to buy. For investors, Weston argues, the price entry point is less critical given gold’s diversification role. For traders, chasing the rally is harder. The market has already priced in around 150 basis points of Fed cuts, while the dollar has remained resilient. “It is too hot for many to short, and pullbacks have been met with a wall of buying,” Weston says. He suggests waiting for a retracement toward $3,550 to enter new long positions.
The latest leg higher has been fuelled by geopolitical tensions in the Middle East. Reuters reported that the rush into havens sent bullion to record intraday levels, alongside a spike in oil.
Retail flows split
Retail trading has also surged. Weston says Pepperstone’s global client base is heavily active in gold, but flows are evenly balanced. “Almost 50% of open positions are long, positioned for new highs, and 50% are betting on downside. That disagreement is surprising at all-time highs,” he says, suggesting sentiment remains divided even as professional money continues to accumulate.
The road ahead
Gold’s rally sits within a broader context of shifting global capital flows. Fed policy, dollar dynamics, central bank reserves and geopolitical risk will all determine whether momentum continues. What is clear is that the metal has re-established itself as a core holding, not just a tactical trade.
If confidence in US institutions wavers or central bank demand remains unrelenting, the market could yet test levels that once seemed out of reach.
