Gold's rally far from over as bullion could hit $5,000 mark, analysts say

With gold prices smashing records pretty much every week, are investors too late to join the current rally? Analysts say conditions supporting gold's bull run remain firmly in place and the $5,000 mark is in sight.

Gold surged past $4,000 an ounce on Wednesday to hit an all-time high. Bullion's status as a safe haven asset amid rising economic and geopolitical uncertainty, alongside expectations of further interest rate cuts by the US Federal Reserve have driven its rise.

Spot gold was up 1.37 per cent at $4,035.11 per ounce at 11.40am UAE time on Wednesday.

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“Gold is at record high prices and in a strongly overbought territory. Yet, fundamentals remain supportive of the bull run,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

“Previous bullish cycles suggest that the rally has room to extend further. A rally to $5,000 per ounce is not ruled out.”

Demand for US dollar and Treasuries continues to wane, and emerging markets are replacing US dollar-denominated holdings with gold, she said.

The appetite for other major currencies such as the euro, yen and sterling is also weakening, she said, and this supports gold's rise with “trend and outlook” for the asset remaining positive.

Vijay Valecha, chief investment officer at Dubai-based Century Financial, agreed and said investments in gold are still viable.

He said the precious metal appears to be "overheated" from a technical standpoint. For buying gold, any profit-booking by existing investors, which could push price to the $4,000 psychological mark, followed by the $3,900 price mark, could serve as a "good entry level", he suggested.

However, Ole Hansen, Saxo Bank's head of commodity strategy, sees resistance in the $4,100 to $4,150 per ounce area.

For investors who have missed the rally, a correction of $200 to $300 from the current levels may be the best opportunity for them to place their bets, he suggested.

Best-performing asset

As one of the best-performing assets of 2025, spot gold is up 53 per cent year-to-date after rising 27 per cent in 2024.

“The strength of gold so far this year is driven by several overlapping trends that have proved resilient throughout the year,” Fawad Razaqzada, market analyst at City Index and Forex.com, said. “Many of these factors may well remain relevant in the fourth quarter.”

Demand for gold from central banks around the world is one factor driving the bull run.

An overwhelming majority of central banks plan to expand reserves, with none expecting to reduce them despite record prices, Mr Razaqzada said, citing the latest survey from the World Gold Council.

“With conflicts persisting in Europe and the Middle East, and with US-China relations still strained, many central banks probably view gold as an essential hedge against geopolitical risk,” he said.

“Nearly three-quarters of respondents also anticipate a decline in the dollar’s share of reserves, a shift that leaves gold as the natural beneficiary.”

Multiple factors

Bullion’s rally has been driven by multiple factors, including expectations of interest rate cuts, geopolitical political uncertainties, economic headwinds, a sharp rise in investment inflows into gold exchange-traded funds (ETFs) and a consistently weak dollar.

Investors are pricing in a 25-basis-point cut in the US benchmark interest rate at the Fed meeting this month, with an additional 25-basis-point cut anticipated in December.

When interest rates are slashed, the allure of precious metals such as gold – which do not offer interest or dividends like stocks and bonds – goes up.

Political turmoil in France and Japan has also boosted demand for safe-haven bullion.

Global physically backed gold ETFs recorded their largest monthly inflow in September, resulting in the strongest quarter on record of $26 billion, according to a report from the World Gold Council on Tuesday.

By the end of the third quarter, global gold ETFs’ total assets under management reached a record high of $472 billion – a 23 per cent quarter-on-quarter rise. Gold holdings rose 6 per cent on quarterly basis to 3,838 tonnes, only 2 per cent shy of the 3,929-tonne peak recorded in November 2020, the council said.

Billionaire weighs in

Billionaire investor Ray Dalio on Tuesday said that gold is “certainly” more of a safe haven than the US dollar, and the metal’s record-setting rally echoes the 1970s, when it surged during a time of high inflation and economic instability.

“Gold is a very excellent diversifier of the portfolio,” Mr Dalio said at the Greenwich Economic Forum in Connecticut.

“So, if you were to look just from the strategic asset allocation mix perspective, you would probably have as the optimal mix something like 15 per cent of your portfolio in gold.”

Mr Razaqzada said the weakening dollar in particular has aided the gold rally this year.

The greenback has endured one of its worst years since the early 2000s. Much of this year’s slide in the US currency is linked to tariff-induced fears of stagflation and a broader sense that America’s economic dominance is being challenged, he said.

“The trend of de-dollarisation, whereby foreign investors diversify away from US assets, has also gathered pace. For gold, which is priced in dollars, the slide has been an undeniable tailwind, making the metal more attractive for buyers across other currencies,” Mr Razaqzada said.

“For investors, gold remains both a defensive hedge and a growth story in its own right. The drivers supporting gold look durable enough to keep sentiment positive into the final quarter.”