Central Banks and Fed Policy Fueling Demand

Several key factors are converging to create a bullish environment for gold, according to market analysts.

Sustained Central Bank Buying

Central banks worldwide are expected to continue diversifying their reserves by adding gold. Goldman Sachs projects average annual purchases of 80 metric tons in 2025 and 70 tons in 2026. This trend is particularly strong among emerging market central banks moving away from traditional reserve currencies. For more data, see the World Gold Council.

ETF Inflows and Investor Interest

A primary catalyst for the price surge has been strong inflows into Western gold-backed exchange-traded funds (ETFs). According to Goldman's research, increased diversification from the private sector into the relatively small gold market could significantly boost these holdings.

Federal Reserve and Dollar Weakness

The outlook for gold is closely linked to the monetary policy of the U.S. Federal Reserve.

• Expectations of interest rate cuts contribute to bullish sentiment.

• Historically, easing cycles and fiscal expansion have fueled demand for hard assets.

• A weaker U.S. dollar makes gold cheaper for international buyers, further amplifying global demand.

Geopolitical and Economic Uncertainty

Current economic conditions, including persistent inflation, currency devaluation risks, and rising geopolitical tensions, are driving investors toward safe-haven assets like gold.