Spot gold touched a record US$4,381 in October, crossing
milestones once thought distant. The drivers are neither exotic nor temporary -
persistent US fiscal deficits, an implicitly weak-dollar posture, geopolitical
fractures from Ukraine to NATO’s eastern flank, and rising unease over the
Federal Reserve’s independence. In such an environment, gold is not merely a
hedge — it is a statement of mistrust in paper promises.
What distinguishes this cycle is the role of central banks.
For five consecutive years, they have been diversifying away from dollar
assets, stepping in when investor positioning becomes stretched and prices
wobble. This behavior places a firm floor under gold, resetting its trading
range far higher than in previous cycles.
JP Morgan estimates that while 350 tons of quarterly demand
keeps prices stable, actual buying may average 585 tons per quarter in 2026 — a
telling imbalance.
Investors are following suit. Gold allocations have risen to
2.8% of total assets, up from 1.5% before 2022 — elevated, but hardly extreme
given the scale of global uncertainty.
Forecasts from Morgan Stanley, JP Morgan and Metals Focus
converge on the same conclusion, US$5,000 gold is no longer sensational. It is
increasingly plausible. The real question is not how high gold can go, but how
fragile confidence in fiat currencies has become.
