By Linh Tran, Market Analyst at XS.com
Gold is currently benefiting from multiple supportive factors at once, including macroeconomic conditions, monetary policy, geopolitical tensions, and the official reserve strategies of central banks. After setting a series of records throughout the year, gold prices have temporarily marked a new all-time high at around $3,760/oz. This milestone reflects investors’ growing confidence in gold’s role as a safe-haven asset and a long-term store of value in an increasingly uncertain environment.
On the economic front, the Federal Reserve’s decision to cut interest rates by 25 basis points at its September 2025 meeting signaled that the long tightening cycle may be nearing its end. However, Chair Jerome Powell emphasized caution, stressing that future policy would remain data-dependent, particularly on inflation and labor market conditions. In practice, U.S. inflation has cooled from its cycle peak but still remains above the 2% target, while growth shows signs of slowing. This combination creates a “soft enough” environment for the Fed to maintain an accommodative stance, but not weak enough to trigger fears of a deep recession. Against this backdrop, with real yields trending lower and the U.S. dollar lacking momentum, gold continues to benefit as an attractive alternative asset.
Investment flow data further underscore gold’s renewed strength in institutional portfolios. According to the World Gold Council, gold ETFs attracted an additional $5.5 billion in August 2025 alone, lifting total assets under management to $407 billion, the highest level in more than three years, while holdings rose to 3,692 tonnes, only about 6% below the historical record. Year-to-date through August, net inflows into gold ETFs reached $47 billion, the second-highest on record after 2020. This clearly demonstrates that not only retail investors but also financial institutions are significantly increasing their allocations to gold as part of risk-hedging strategies.
Another critical and longer-term factor lies in central bank demand. In just the first half of 2025, central banks collectively purchased a net 410 tonnes of gold (244 tonnes in Q1 and 166 tonnes in Q2), extending a streak of record-setting years since 2022. The World Gold Council’s annual survey shows that 95% of central banks believe global gold reserves will increase over the next 12 months, and 43% plan to raise their own reserves directly. China, India, Turkey, and several Middle Eastern nations stand out as consistent buyers, reflecting strategies to diversify foreign exchange reserves and reduce reliance on the U.S. dollar amid an increasingly complex geopolitical landscape. This steady official sector demand forms a structural pillar supporting gold’s upward trajectory, even when private investment flows temporarily weaken.
The geopolitical backdrop adds another layer of support to gold’s appeal. Escalating tensions in the Middle East, particularly the conflict in Gaza alongside renewed U.S.-Arab diplomatic efforts, as well as the intensifying standoff between Russia and NATO following repeated airspace violations, all contribute to a more fragile global investment climate. These unpredictable developments create strong safe-haven demand for gold. While breakthroughs in diplomacy may temporarily reduce defensive positioning, they are unlikely to fundamentally alter the structural drivers underpinned by institutional demand.
Overall, the medium-term outlook for gold remains tilted to the upside. The Fed’s cautious easing cycle suggests further room for real yields to decline, institutional flows into ETFs are returning strongly, geopolitical risk remains elevated, and net central bank purchases are being sustained at a large scale. In the short term, however, gold may face necessary technical corrections as it repeatedly sets new highs, with profit-taking pressures potentially amplified by volatile macroeconomic data releases.