Introduction to Gold’s Record-Breaking Rally
Gold rose for its fourth straight session to $4,988 per ounce on Friday, nearing the $5,000-per-ounce milestone and capping its strongest week in five years. This relentless precious-metals rally also propelled silver to a record $100 in the same session. The yellow metal is up over 8% on the week — its best performance since March 2020 and nearly 15% year to date, an advance few expected after gold surged 64% in 2025, its strongest annual gain since 1979.
Gold’s Climb to $5,000: A New Normal?
Gold’s climb to $5,000 is pushing investors to reassess whether the move reflects late-cycle excess after a historic run or the early phase of a structural shift in portfolio construction. Major Wall Street banks increasingly treat $5,000 gold as a base case rather than a stretch scenario. This shift in perspective suggests that gold may be entering a new era of demand, driven by factors beyond traditional market forces.
A Structural Shift in Gold’s Demand
Jeremy Schwartz, global chief investment officer at WisdomTree, said gold should no longer be viewed as a niche hedge. According to Schwartz, gold has become a "missing strategic allocation" in many portfolios rather than an alternative asset. Central bank demand has reshaped the market, with purchases quadrupling since 2022 to an average of 60 tonnes per month. Emerging market central banks continue diversifying reserves as geopolitical and monetary neutrality concerns persist.
New Players in the Gold Market
Demand is no longer limited to official buyers. New, largely price-insensitive participants have entered the market, including Chinese insurers, Indian pension funds, and corporate buyers such as Tether. Despite its surge, gold remains under-owned by many investors. “Most diversified portfolios still hold just 0–3% in gold versus a market-implied allocation closer to ~10–12%, creating asymmetric upside if even modest reallocations occur,” Schwartz said.
Why Goldman Sachs Says This Gold Rally Is Different
Earlier this week, Goldman Sachs raised its December 2026 gold forecast to $5,400 an ounce, up from $4,900, highlighting that “private sector diversification into gold has started to realize.” Goldman noted that while central bank purchases drove gains in 2023 and 2024, the rally intensified in 2025 as private investors, ETFs, and physical buyers began competing more aggressively for bullion. The firm expects central bank buying to remain elevated through 2026, while lower interest rates and persistent macro policy risks continue to support investor demand.
The Risks and Rewards of Gold Investment
Goldman’s Daan Struyven said, "We assume private sector diversification buyers, whose purchases hedge global policy risks and have driven the upside surprise to our price forecast, don’t liquidate their gold holdings in 2026." The bank highlighted that gold supply is largely price-inelastic, with mine output adding only about 1% annually to global stocks. This means that rallies typically end only when demand fades rather than when supply responds.
Conclusion
In conclusion, gold’s record-breaking rally is driven by a combination of factors, including central bank demand, private sector diversification, and a shift in portfolio construction. As major Wall Street banks increasingly treat $5,000 gold as a base case, investors are reassessing their allocations to gold. With gold remaining under-owned by many investors and new players entering the market, the upside potential for gold prices remains significant. As the market continues to evolve, it will be essential to monitor the trends and factors driving gold’s demand to make informed investment decisions.
