Gold breaks to record as investors seek alternatives in a fractured world

Key Points:

• Gold hits fresh record at USD 3,547, up 34% year-to-date; silver up 41%.
• Fed cut expectations and governance concerns drive safe-haven demand.
• Rising long-end yields and weak dollar erode bonds’ appeal, support gold.
• ETF inflows return after years of selling, adding depth to central-bank demand.

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Gold has surged to a fresh record high at USD 3,547 per ounce, extending an already strong year that has seen the yellow metal gain 34% year to date. Silver has provided further support to the sector, trading above USD 40 for the first time in 14 years, leaving it up 41% year to date. The latest leg higher reflects a potent mix of renewed rate cut expectations, mounting concerns over Federal Reserve independence, and a fragmenting world order that is reshaping flows across safe-haven assets.

Rate cut expectations and Fed independence worries

Markets now price a near-certain Federal Reserve rate cut in September, with further and potentially accelerated easing into year-end, should incoming economic data continue to weaken amid tariff strains. Lower front-end yields reduce the opportunity cost of holding gold and invite fresh allocations from investors who in recent years had been sidelined by elevated funding costs.

However, the bullish narrative is not just about cuts. Governance concerns have added a premium in recent weeks. Treasury Secretary Scott Bessent will soon begin the process of finding the next Fed chair, a process that follows President Trump’s attempt to remove Governor Lisa Cook. If successful, it could hand him a majority on the FOMC and the ability to reshape the US central bank in pursuit of lower interest rates. The episode highlights institutional fragility at the world’s most important central bank. For investors, this raises questions about the long-term independence of U.S. monetary policy—a concern that gold naturally absorbs as a hedge against political interference. 

Fragmentation on display

Geopolitics remain an important catalyst. The Beijing military parade featuring both Vladimir Putin and Kim Jong Un alongside Xi Jinping served as a stark reminder of a fractured world order. With great power blocks visibly aligning, central banks and sovereign wealth funds continue to diversify reserves. Gold has been a direct beneficiary, with record buying from central banks since 2022 complementing private investment demand, the latter now showing signs of picking up.

Long-end yields dent bonds’ haven appeal

The rally is also linked to conditions in the sovereign bond market. Thirty-year U.S. Treasury yields hover near 5%, UK gilt yields have reached multi-decade highs, and Japanese government bond yields are at record levels. For many investors, long-dated bonds no longer serve as the default defensive allocation, opening the door for gold to capture a larger share of safe-haven demand alongside other tangible assets such as silver and platinum, both supported by constrained supply outlooks.

Dollar weakness and global flows

Meanwhile, the dollar remains pinned near three-year lows despite sporadic attempts to bounce. Policy uncertainty in Washington, a dovish skew in rate expectations, and relative strength in other major currencies have kept the greenback under pressure. For non-dollar investors, this has lowered their gold returns in local currencies, examples being XAUEUR up 20%, and XAUJPY up 27%.

ETF buyers return after four years of net selling

Another key shift has been the return of buyers to gold-backed exchange-traded funds. After four years of net selling, ETF holdings are once again rising, reversing what had been a persistent headwind. So far in 2025, ETFs have added 326 tons of gold—almost identical to the 331 tons sold over the past two years combined. The reversal underscores a broadening of the bid beyond central banks and momentum-focused traders, adding depth to the rally.

Momentum and silver’s support

Technical factors have also reinforced the move. Last week’s break above USD 3,450 triggered a wave of systematic and momentum-driven buying, with a feedback loop amplified by fear-of-missing-out (FOMO) flows. These flows are typically short-term in nature, leaving the price vulnerable to long-liquidation should it fall back below USD 3,450. Silver’s surge through USD 40, its highest level since 2011, has provided further confirmation, but like gold it must now consolidate these lofty gains to avoid triggering long-liquidation pressure. 

What could challenge the rally?

With markets heavily skewed toward a bullish focus, it remains important to consider what could go wrong and trigger a setback. The list of risks is shorter than usual but still relevant. Beyond the build-up in speculative positioning that could sudden unwind if recent gains fail to hold, a hawkish surprise from the Fed—either delaying cuts or offering tougher forward guidance—could dent sentiment. A disorderly rebound in the dollar would also test conviction. Finally, with long-term yields already stretched, a sharp reversal lower could restore bonds’ safe-haven appeal at the margin.

Conclusion

Gold’s rally to a fresh record is being driven by more than inflation fears or rate expectations alone. It reflects a convergence of factors: governance risks in the U.S., geopolitical fragmentation, waning trust in traditional safe havens, and renewed demand from institutional buyers. With both gold and silver outperforming most asset classes in 2025, and with ETF inflows adding fresh support, the case for precious metals remains strong.