Published by Global Banking and Finance Review
Posted on December 17, 2025
By Polina Devitt
LONDON, Dec 17 (Reuters) - Gold has made its biggest jump since the 1979 oil crisis in 2025 -- with prices doubling in the last two years -- a performance which might previously have meant forecasts of a big correction.
Yet a growing investor pool and factors ranging from U.S. policy to war in Ukraine mean analysts at JP Morgan, Bank of America and consultancy Metals Focus now see bullion hitting $5,000 per troy ounce in 2026.
Spot gold prices reached a record $4,381 in October, having never hit $3,000 before March, driven by demand from central banks and investors with new participants ranging from stablecoin issuer Tether to corporate treasurers.
BofA strategist Michael Widmer said expectations of further gains or portfolio diversification are driving the buying, with impetus from U.S. fiscal deficits, efforts to narrow the U.S. current account deficit and a weak dollar policy.
Philip Newman, managing director at Metals Focus, said further support stemmed from worries about U.S. Federal Reserve independence, tariff disputes and geopolitics including war in Ukraine and Russia's interaction with NATO countries in Europe.
CENTRAL BANKS ANCHOR THE CYCLE
For a fifth year running, central bank diversification of reserves from dollar-denominated assets should give a foundation for gold in 2026 as they buy when investor positioning is stretched, money rotates and prices fall, analysts said.
"The price level is supported much higher than where you started because you get that central bank demand coming through," said Gregory Shearer, head of base and precious metals strategy at JP Morgan.
"And then all of a sudden we're sitting above $4,000 in a much cleaner environment from a positioning perspective, which then allows the cycle to continue going forward," he said, referring to market signals used by investors to start extending positions again after de-risking.
JP Morgan analysts estimate that for prices to stay flat, quarterly central bank and investment demand of around 350 metric tons is needed. They forecast this buying to average 585 tons per quarter in 2026.
Investor holdings of gold as a share of total assets under management have risen to 2.8% from pre-2022 levels of 1.5%, JP Morgan's Shearer said, adding that while elevated, this was not necessarily a ceiling.
Morgan Stanley forecasts gold at $4,500 per ounce by mid-2026, while JP Morgan expects average prices at above $4,600 in Q2 and more than $5,000 in Q4 and Metals Focus forecasts gold at $5,000 by end-2026.
HEDGING EQUITY BETS
Global central bank umbrella body BIS said this month that a combination of gold and share prices soaring in unison is a phenomenon not seen in at least half a century - raising questions about a potential bubble in both.
Part of this year's gold buying was essentially a hedge against potential sharp corrections in equity markets, gold analysts said, fuelling a fire driven by tensions between historic allies over tariffs, global trade and war in Ukraine.
This remains a risk for gold, as sharp corrections in equity markets often force the sale of safe-haven assets.
Nicky Shiels, head of metals strategy at MKS PAMP, expects prices to average $4,500 in 2026, predicting that gold will become "a multi-year secular critical portfolio asset rather than a cyclical hedge".
Analysts expect gold's rally to be less dramatic in 2026.
"The world has stabilised a bit," said Macquarie, whose economists forecast a revival in global growth, central bank easing tapering off and relatively high real interest rates.
Macquarie sees average prices at $4,225 in 2026, slightly below Wednesday's spot gold price of $4,317.
Meanwhile, central bank purchases and inflows into gold ETFs are seen slowing next year with jewellery demand, which fell 23% in the third quarter, under pressure and only partly compensated for by retail demand for bars and coins.
In October, queues of retail customers seen in Australia and Europe possibly represented a reallocation from jewellery to investment, which may continue next year, said Amy Gower, commodities strategist at Morgan Stanley.
Yet, demand for bars and coins did not see much profit-taking after October, said Newman at Metals Focus, adding: "If we do see prices start to run up again, you could well see buying into that rally as well".
Supply response has been muted so far with a 6% growth in recycling and no significant central bank selling.
Macquarie said total gold demand is on track to rise 11% this year to 5,150 tons, before falling to 4,815 in 2026.
CRYPTO MEETS GOLD
Fed easing brought a new visible institutional investor in gold in the form of crypto company Tether, issuer of the world's largest stablecoin.
Quarterly reports show Tether bought about 26 tons of gold in the third quarter, five times more than China's central bank reported buying.
"It's not to be ignored," Morgan Stanley's Gower said, but added that it is unclear whether other companies would have a similar strategy because the U.S. GENIUS Act does not list gold as a reserve asset for stablecoins.
Further investment pool expansion could come from Asia as India allowed some pension funds to buy gold and silver ETFs.
China also allowed some insurance funds to buy gold in February, although Metals Focus said these purchases have been limited so far due to bullion's rally.
(Reporting by Polina Devitt;Editing by Veronica Brown and Alexander Smith)
Explore more articles in the Headlines category
