Commentary: The Enduring Logic Behind Gold’s Record Highs

Over the past two weeks, gold prices have experienced a strong upward trend following a brief period of consolidation. London spot gold has surged nearly 7% to a record high of $3,578 per ounce, while COMEX gold reached $3,640 per ounce. This movement is discussed within the context of the long-term “bull market” thesis for gold, emphasizing gold’s unique value as a long-term portfolio asset. Despite the possibility of short-term fluctuations, profound global geopolitical shifts and changes in the financial system have reinforced the view that gold’s long-term prospects remain robust, and a market “turning point” is not imminent[para. 1].

Short-term factors boosting gold’s price include rising expectations of a U.S. Federal Reserve interest rate cut, especially after Chairman Jerome Powell clearly indicated at the Jackson Hole symposium that a rate-cutting cycle could begin in September. As the interest rate gap between the U.S. dollar and other currencies narrows, assets from lower-rate countries—including currency valuations—could rise, and this is reflected in recent gains of the yuan versus the dollar. Other precious metals, such as silver and copper, have also climbed, marking copper’s breakout above $10,000 per ton. Although gold’s long-term trend has diverged from simple correlations with interest rates—thanks to central banks’ structural demand and gold’s safe-haven appeal—short-term drops in real interest rate expectations still support gold’s performance. Conversely, when real interest rate expectations rise in the short term, gold prices may dip, offering potential buying opportunities[para. 2].

Political pressure has further influenced market perceptions. Since his inauguration in January 2025, President Donald Trump has publicly criticized the Fed for slow action on rate cuts and heightened expectations for a dovish policy stance, which has further impacted trust in the U.S. dollar. Recent personnel changes at the Fed—such as the resignation of Governor Kugler, the appointment of Miran (who favors a long-term weak dollar) as interim governor, and the controversial dismissal of Governor Cook—are seen as threatening the Fed’s independence. With more Trump-appointed governors, up to five out of seven if Powell resigns after his current term, the Fed’s policy direction could be significantly affected[para. 3].

Another significant catalyst is growing global concern over fiscal sustainability, which has led to sell-offs in long-term government bonds—including U.S. Treasuries, UK gilts, Japanese and French government bonds—due to mounting government debt and fiscal challenges. These conditions have pushed yields to multi-year or even multi-decade highs. Systemic anxiety about fiscal discipline is leading to a global asset allocation shift from government bonds toward “safe” assets such as gold[para. 4].

Innovations such as gold-backed stablecoins and the World Gold Council’s plan for a digital gold product could further increase gold’s liquidity and market appeal, driving marginally higher demand expectations[para. 5].

Medium- to long-term factors supporting the “long bull” thesis include the structural weakening of the U.S. dollar and increased momentum for global de-dollarization, possibly accelerated by the appreciation of Asian currencies. The dollar is estimated to be overvalued by 10–15%, and structural supports—such as U.S. economic strength and globalization—are eroding. Over the next 12 months, the U.S. Dollar Index could fall by 5–10%, with more downside risk in the next three to five years. This process is expected to be expedited by reallocation decisions in Asia as their currencies appreciate against the dollar[para. 7].

Gold’s role as a highly scarce and credible financial asset is increasingly important amid global uncertainty. Central banks and institutions are expected to increase gold holdings over a cycle of nearly 20 years, potentially restoring gold’s share of global reserves to post-Cold War levels by 2045. The declining appeal and usefulness of the dollar and U.S. Treasury bonds—due to policy unpredictability, fiscal indiscipline, trade restrictions, and the introduction of expensive fiscal legislation—further reinforce gold’s value as a store of wealth[para. 9][para. 10].