Make way, Magnificent Seven. Move on, AI. Goodbye, data center. The financial markets have a new favorite—gold. And you shouldn't be shocked if it remains so.
Gold has increased by 57% in 2025, setting new record closing prices 21 times within the last 63 trading days. The S&P 500 has only risen 13.2% this year, and even Nvidia, the top performer among the Mag 7 stocks, has only climbed 34%.
The surge in gold prices didn't appear from thin air.Central banks have consistently purchased gold as their primary strategy.Following the Russian invasion of Ukraine—no one wants their dollar holdings to be locked up—along with generally lenient financial conditions, which have also boosted demand. Private investors in the U.S., Europe, and China have also invested heavily in gold.
Even though the metal is being traded at more than $4,000 per ounce, there are still several well-known supporters, including JPMorgan Chase CEO Jamie Dimon, who stated it "could easily reach $5,000, $10,000in settings such as this," he added, "this is one of the rare instances in my life where it's somewhat reasonable to have some in your portfolio.
But let's not jump ahead. Gold can't keep rising indefinitely, and there are some indications that the precious metal may be poised for a break. For one, silver prices reached theirhighest record since 1980, a sign that investors have discovered another appealing diversion. "This is usually a late-cycle trend for precious metals, as investors seek profits," the analysts at PGM Global state. "When investors pursue gains in gold alternatives, and those metals decline, it often signals trouble for gold prices as well."
Investors, however, are still seeking a trigger. The one factor that is almost certain to halt a gold surge is a Federal Reserve tightening cycle, according to Louis-Vincent Gave, CEO of Gavekal Research, who refers to rising interest rates as "the most evident threat to bull markets in precious metals."
That's not expected to occur anytime soon. After all, the central bank is reducing rates,not raising themHigher oil prices might also pose a risk to gold, but oil has been experiencing downward pressure recently, and a surplus of gold is improbable since suppliers have not had sufficient funds in recent years to quickly increase production, Gave notes. A stronger yen or renminbi could also affect gold prices—stronger currencies would not encourage Asian savers to turn to gold for safety—but there is little indication of this happening with either currency.
Even the charts indicate little more than a temporary setback on the path toward further increases. Although Deutsche Bank analyst Michael Hsueh points out that the current surge in gold may have already reached a technical peak, there is no "sign of an approaching correction." At best, it could signal a phase of more balanced activity.
And let's be honest—blocking a powerful rally isn't simple. Even PGM's strategists aren't overly pessimistic; they're just waiting for a temporary decline. "[We] still favor gold but prefer to wait until a period of consolidation before increasing our position," they note.
Perhaps it's wise to set aside the idea that something will halt the gold surge, at least for the present. Indeed, historical data indicates that gold's impressive upward movement still has significant potential, as stated by SentimenTrader. The company points out that when gold achieves so many new peaks within a three-month span, it tends to be higher one year later in 80% of cases. Such movements are "uncommon, with similar instances only observed during some of gold's strongest historical rises," the report mentions.
So, in the event of a decline, investors shouldn't be discouraged but should instead turn to the yellow metal.
Contact Teresa Rivas atteresa.rivas@barrons.com