Will Gold Continue to Make New Highs This Year?
LONDON (January 6) After one of its strongest annual performances on record, gold has started the new year on a firm footing. With a data-packed second half of the week, we could see a bit more volatility in gold and other buck-denominated assets should the data calendar deliver any major surprises.
While much of the gold-buying in recent years has been powered by heavy central-bank buying, its more recent gains reflect a global turn towards lower interest rates. So, data will matter for gold, especially as signs emerge of slowing central bank buying.
Gold’s Long-Term Bullish Case Intact
The longer-term case for holding gold is still intact, but the environment looks less forgiving than it perhaps did throughout last year. For one, much of the monetary easing that supported gold’s rally is already behind us, and expectations for further rate cuts have cooled. Several central banks now appear closer to a pause, while others are openly discussing the need to normalise policy.
In that sort of world, gold could potentially lose one of its most powerful supports: falling interest rates. Meanwhile, physical central bank gold buying stayed robust through 2025, though the pace slowed as prices pushed to record highs. China, which has played a pivotal role in recent years, has eased back its purchases, raising some concern that elevated prices may discourage further accumulation.
At the same time, a handful of countries have already begun trimming their gold reserves, suggesting that profit-taking is no longer unthinkable at these levels.
Geopolitics continues to matter, though the picture is becoming more nuanced. While conflicts and strategic tensions helped drive safe-haven flows last year, early signs of de-escalation in parts of Eastern Europe and the Middle East have slightly dulled gold’s defensive appeal. That said, global stability remains fragile. Political risks have not disappeared, and sudden flare-ups — particularly involving energy markets or emerging economies — could quickly revive demand for protection.
The US dollar is another key variable. A softer dollar helped underpin gold in 2025, but it is far from clear that this trend will extend indefinitely. Any renewed inflation pressures or supply-side shocks could strengthen the US dollar and complicate the outlook for precious metals.
So, gold looks less like a one-way bet and more like a test of conviction. The metal may stay elevated and remain strategically attractive, but the powerful tailwinds of last year are fading. Without a fresh geopolitical shock or a renewed push towards looser policy, gold may struggle to replicate its previous surge — and investors should be prepared for a more measured, and potentially choppier, year ahead.
Investing.com
