Gold's unstoppable run hits new highs and heads for $3,700

A rally that does not stop. On the contrary, the race continues. Gold updates the records, after breaking through the $3,600 an ounce mark earlier this week in London, now the barrier in the crosshairs is $3,700.

A brisk march that has led the precious metal to rise about 40 per cent since the beginning of the year and more than 10 per cent in the last three months, as can be seen from the graph on the page. In August alone, the gain was 5 per cent, the strongest month since last April. Investors are wondering how long the bullish trend will continue. First we have to consider what factors have supported gold's rally in recent months. Starting with expectations about the Fed. A rate cut at next week's Federal Reserve meeting seems to be a foregone conclusion. So far, expectations of rate cuts have contributed to gold's rise.

Lower rates reduce the opportunity cost of holding assets such as gold or silver, in an environment where investing in bonds becomes less profitable, thus driving up the prices of precious metals, identified as alternative assets. Geopolitical tensions are certainly another growth driver for gold, with the Russia-Ukraine conflict far from a diplomatic resolution. Tariffs have pushed investors towards safe-haven assets, capable of holding value even in times of political uncertainty, such as these days with the government crisis in France. "Historically, gold has gained a lot in the 500 days following the Fed's first rate cuts, with cumulative returns close to +25%," comments Alessandro Valentino, product manager at VanEck. "Today, with rates expected to ease, central banks actively accumulating and Western investors re-engaging, gold's momentum remains intact."

 Global central bank purchases are another important supporting factor. "Central banks have been net buyers for 15 consecutive years, driven by emerging markets seeking diversification and 'de-dollarisation'. Asian physical demand - bullion, coins and jewellery - remains robust,' Valentino adds. A recent World Gold Council survey shows that 73% of central banks plan to reduce their dollar reserves over the next five years, while 76% plan to increase their gold reserves. Leading the purchases in the first half of the year are the central banks of China, Turkey, Poland, Azerbaijan, Kazakhstan, Qatar and India. In the latter case, it should also be noted that India's pension regulator is considering removing the 5% limit on gold investments, providing a further potential growth driver for prices.

"Gold has continued to shine in 2025 and, despite exceptionally strong performance over the past three years, we remain optimistic about its future as key macroeconomic and geopolitical factors continue to be favourable," explains Rebekah McMillan, associate portfolio manager multi-asset team at Neuberger Berman. "Since August 2023, the traditional relationship between gold and real rates has broken down, with gold continuing to rise to new highs despite rising real rates. The rise in price has aligned with the steepening of the yield curve,' McMillan continues. 'We believe the long-term segment of global yield curves will remain under pressure as developed markets grapple with rising government debt and a shift from monetary to fiscal dominance amid a weakening dollar. In this scenario, how to manage asset allocation?