There are not many things in markets you can say with confidence, but here is one: investors have rediscovered their appetite for gold.
According to Goldman Sachs, the yellow metal has broken out of its summer trading range and surged 14% since late August, hitting about $3,865 an ounce and clocking a 47% gain so far this year.
That is not the sort of move you get from jewellery buyers in Mumbai. Instead, Goldman points to three “conviction” buyers driving the rally: exchange-traded funds (ETFs), central banks and, to a lesser degree, hedge fund speculators.
Of these, ETFs stand out. Western holdings jumped by 109 tonnes in September, miles ahead of the 17 tonnes Goldman’s models predicted on the basis of falling US interest rates.
To put that in context, global ETF demand has been strong enough that even a modest shift by private investors away from government bonds into gold can have an outsized effect.
The market for gold ETFs is worth only about 1.5% of the privately held stock of US Treasuries. A sliver of diversification, in other words, packs a punch.
Central banks, meanwhile, look to have returned from their usual summer lull. The analysts suspect that official purchases account for much of the unexplained part of September’s rally. Speculators have been quieter, with positioning relatively unchanged, suggesting the move has been driven more by long-term investors than hot money.
Goldman’s price forecasts are unchanged for now – $4,000 an ounce by mid-2026 and $4,300 by year-end – but the risks are skewed upwards.
The case for gold rests on three legs: stronger and stickier central bank demand, private investors taking a fresh look at diversification, and the metal’s enduring role as a hedge in the sort of economic shocks that unsettle both equities and bonds.
For UK investors, the price action is a reminder that gold is less about steady income and more about portfolio insurance.
At a time when gilts have wobbled and global growth looks patchy, it is not hard to see why investors have been willing to pay up for that insurance.