Welcome back to the deep dive. Today we are tearing
through a stack of sources that tell an astonishing,
almost, well, unbelievable story. Astonishing
really is the only word for it. We're talking
about the historic Jaw -dropping performance
of gold in 2025. This wasn't just a good year
for precious metals. No, not at all. It was,
I think, a fundamental re -rating of what global
asset stability even means. If you were tracking
the market, you saw gold shatter over 50 all
-time highs. Throughout the year, yeah. Posting
approximately 60 % returns in US dollar terms,
that kind of movement is, it's truly rare. 60%.
I mean, that performance didn't just beat. It
absolutely outperformed virtually every major
asset class we tracked. Right. Equities, fixed
income, commodities, cash. We're not talking
about a modest bump. We are looking at a monumental
rally that drove the price comfortably past $4
,000 an ounce. And our mission in this deep dive
is really to shortcut you past the simple headlines.
We've pulled analysis from the World Gold Council,
JP Morgan, Saxo Bank. And they all point to something
bigger. They do. The sources clarify one thing
immediately. This surge wasn't due to a single
isolated event. It wasn't just a minor inflation
scare. It was a perfect storm. A perfect storm
is a great way to put it. It was this complex
interaction of geopolitical tension, major shifts
in central bank strategy, and some very deep
dollar dynamics. That's how we got here. OK,
let's unpack this 60 % return. That demands a
detailed explanation. What exactly fueled this
monumental movement? The sources show it was
a powerful convergence of cyclical opportunities
and, I think, structural anxiety, meaning you
had high -risk premiums baked into the price,
reflecting immense global uncertainty. And at
the same time, you had this powerful market momentum
from very dedicated buyers. So let's start with
just the sheer scale of the climb. Gold comfortably
surpassed $4 ,000 an ounce by the end of 2025.
that acceleration, the sources point to a massive
16 % increase just in the third quarter alone.
16 % in one quarter. And that was driven by,
what, record investor demand? Record frantic
investor demand. And this is where we have to
move beyond the simple narratives. For the listener
who wants that Storow explanation, the World
Gold Council's models attribute the returns to
multiple factors at once. Right. You can't just
point to one thing. Exactly. You're talking about
the convergence of economic growth, risk premiums,
uncertainty, opportunity costs, and momentum.
That's a lot of competing variable. It is. But
that convergence is what makes this rally feel
structural, not speculative. Gold wasn't just
reacting to interest rates anymore. It was doing
multiple— jobs at once. Perfectly put, it was
a safe haven against geopolitical risk, a store
of value against fiscal instability, and a momentum
trade. What's fascinating here is the convergence
of cyclical and structural elements. Gold was
pushed beyond its traditional role as just an
inflation hedge. The market started seeing it
as a necessary risk management tool. A necessary
tool against systemic global instability. Yes.
So if it wasn't just about inflation, let's look
at those systemic drivers. Sources say the foundation
for this whole rally came from state actors.
That's right. Let's dive into that central bank
demand. This is the most important long -term
factor. It's the floor under that $4 ,000 price.
Central bank purchases hit 634 tons in just the
first three quarters of 2025. And for context?
For context, that volume significantly exceeds
the average annual pace we saw in the entire
decade before 2022. It signals a lasting change.
And who are the key players here? We talk about
the US Fed or the ECB. Not primarily, no. It's
the emerging market central banks spearheading
this diversification. They acquired 220 tons
in Q3 alone. Wow. That's a pace 10 % above the
previous year. And this is a robust strategy.
We saw data that banks like Poland's National
Bank kept buying heavily, even as the price shot
up. So they weren't deterred by the high price.
They saw it as a necessary long -term strategic
move. Exactly. Which brings us to the core concept
here. De -dollarization. De -dollarization. We
see nations actively and sometimes aggressively
moving reserves away from dollar -denominated
assets. This is the big structural shift. So
why the sudden coordinated rush away from the
world's reserve currency? The central reason
cited across all the research, especially JP
Morgan's, is the heightened risk from US sanctions
and these growing geopolitical divides. So if
we connect this to the bigger picture, this sustained
reserve diversification is a clear response to
the growing politicization of global payment
systems. And when you say politicization of payment
systems, what does that actually mean for a country?
holding reserves. It means vulnerability. I mean,
reserves used to be just about financial stability.
Now they're also a geopolitical weapon. Right.
A tool. A tool. Yes. So when a nation sees assets
being frozen, seized or access to SWIFT being
restricted, they realize their dollar holdings
come with a huge counterparty risk. Gold has
no counterparty risk. It becomes essential. So
it's a self -preservation measure. And the sources
point out that BRICS countries are really prioritizing
this monetary independence. Absolutely. They
added a collective 166 tons in Q2 alone to push
this agenda. But we have to clarify a nuance
here that JP Morgan highlights. OK. This isn't
an abrupt apocalyptic flight from the dollar.
It's framed as a measured diversification within
broader dollar portfolios. That is a crucial
distinction. It is. It's about making incremental
adjustments to reduce exposure to U .S. legal
reach, not about overthrowing the entire currency
system overnight. So central banks built the
strategic floor. But what accelerated the climb
so fast in the second half of the year? That
has to be private investors. The demand from
the private side absolutely poured fuel on the
fire. Exchange -traded funds, ETFs, saw a staggering
134 % year -over -year growth. 134%. They accumulated
537 tons in just nine months. To put that in
accessible terms, that's an annualized inflow
of nearly $108 billion. So institutions and retail
investors were all making a serious, urgent portfolio
reallocation. They were. They were looking for
alternatives to assets they suddenly saw as less
reliable. The research specifically calls out
a massive shift away from bonds. And that's interesting
because gold usually struggles when yields go
up. Normally, yes. But this time, the massive
demand from Asia and the official sector just
completely canceled out that typical downward
pressure. It was so resilient that Saxo Bank
openly called it a potential regime shift. A
regime shift in how the market values gold. They
realized it was no longer just trading on inflation
expectations. So that systemic instability is
driven by pressures on fiat currencies themselves.
Yes. We've seen the strain from normalized deficits,
fiscal dominance and just, well, political influence
creeping into monetary policy. And those factors
are crucial because they directly impact policy
credibility. Let's just define that term quickly.
Fiscal dominance. It happens when a government's
huge debt and spending pressures basically dictate
what the central bank does. So the central bank
is forced to keep rates low or print money to
finance the deficit. Right, which compromises
its main job of keeping prices stable. For you,
the listener, this means elevated debt levels
challenge the ability of policymakers to manage
the economy without causing a lot more pain.
So when faith in the central bank's independence
wanes, confidence in the currency itself is challenged.
Precisely. And then geopolitical factors, like
sanctions risk, embed these deep long -term risks
into the system. This whole context caused gold
to be repositioned. As more than just an inflation
head. As an institutional credibility buffer.
I like that framing. an institutional credibility
buffer. The price is high because the buyers
are structural, not just chasing a quick profit.
Exactly. JPMorgan's analysis supports that. This
sustained demand made worse by stagflation concerns
is what underpins this high price. Investors
believe this painful mix of low growth and high
inflation is here to stay. So 2025 was the year
the record books were smashed. Let's turn to
2026. What does the outlook look like now? It's
nuanced. The research notes that despite the
rally, gold allocation in global portfolios is
still pretty modest, which suggests there's still
headroom. There is. But the sources give us conflicting
forecasts, which is valuable. On one hand, the
World Gold Council projects range -bound trading
for much of the year. OK, so a stabilization.
A stabilization, especially if economic growth
holds up and geopolitical pressures ease a bit.
They caution we could see corrections of five
to 20 percent, mostly tied to profit taking from
those ETFs. That's the cautious view. That's
the cautious view. But then you have firms like
JP Morgan taking a much more bullish stance.
They're anticipating averages near five thousand
and fifty five dollars an ounce by late 2026.
Whoa. Yeah. Their forecast is fueled by expected
global rate cuts and the absolute expectation
of continued nonstop central bank buying. Here's
where it gets really interesting. We have cautious
stability from one group and a confident push
toward $5 ,000 from another. Right. How do we
reconcile those? What makes JP Morgan so much
more bullish? Well, JP Morgan is betting that
the structural support from central banks is
strong enough to weather any temporary economic
calm. And they assume rate cuts are coming. and
they assume the Fed will cut rates, which is
a powerful traditional driver. The WGC projection,
on the other hand, is more weighted toward how
private investors, especially in the ETF market,
will react if recession risks fade. So if the
world feels less volatile, private money might
rotate back into riftier assets. Exactly, causing
a temporary dip. So what are the key risks that
could derail that higher $5 ,000 projection?
The two major risks cited are reflation. So a
quick return of high inflation plus strong growth
or, ironically, unexpected dollar strength. Dollar
strength. Yeah. Driven by global capital flight
back into the U .S. economy. If either of those
happens, it could erode the massive risk premiums
that built up in 2025. This has been a dense
but absolutely essential deep dive. Let's synthesize
the two biggest takeaways for you, the listener.
First, Gold's 2025 advance was not a speculative
fluke. Not at all. It integrated both cyclical
market forces and major structural shifts, confirming
that those multifactor models are the best way
to understand its movement. And second, central
bank acquisitions are providing a crucial, durable
foundation amid these ongoing de -dollarization
efforts. And as market participants, you have
to continue to track those ETF flows and global
policy developments. Remember, historical patterns
show volatility can return even within a strong
upward trend. The structural story is sound,
but the daily price action will remain choppy.
A story of geopolitical risk. permanently changing
the asset landscape. It really is. Now for a
final thought for you to mull over. Given that
the core dynamic of reserve diversification persists
no matter the near -term price, whether it's
$4 ,000 or $5 ,000, consider how future geopolitical
flashpoints might accelerate those adjustments
even further. Could this sustained incremental
state buying be setting a permanently higher
floor for old prices, fundamentally divorcing
its value from traditional interest rate dynamics?
That's something to think about.