Institutional investors are doubling down on gold — and central banks are keeping the rally alive

Gold is back in the spotlight as institutional investors turn increasingly bullish on the precious metal, driven by a rare alignment of macro forces — Fed rate-cut expectations, record central-bank accumulation, and deepening uncertainty across risk assets, according to a new Goldman Sachs poll conducted on its Marquee platform. Nearly 70% of respondents in the poll — which surveyed more than 900 institutional clients — expect gold prices to rise further by the end of 2026, with 36% betting on prices above USD 5k per ounce next year.

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Respondents identified central-bank purchases and fiscal concerns as the two biggest drivers of gold’s 2026 outlook. The most common view: official-sector buying will keep gold supported even if US growth slows. In parallel, Goldman’s co-head of global commodities research, Daan Struyven, told Bloomberg TV last week that the bank sees “nearly 20% additional upside by the end of 2026,” forecasting USD 4.9k per ounce by next year (watch, runtime: 2:10). The key drivers, he said, are “structurally higher central bank purchases” since 2022 and renewed “inflows into gold ETFs once the Fed begins cutting rates.”

That doesn’t seem to be just a speculative trade, as the surge in the precious metal prices is being underpinned by record official sector demand. The World Gold Council’s (WGC) Central Bank Gold Reserves Survey 2025 shows the biggest official-sector buying spree in more than 70 years. Central banks bought 1.1k tons of gold in 2022 — the most since the WGC began tracking reserves in 1950 — and stayed above 1k tons in 2023. The momentum has continued, with around 450-500 tons of central lenders’ gold purchases in the first half of 2024 alone.

The shift is structural, not cyclical. Some 81% of central banks now expect global gold reserves to rise further, while nearly one-third expect the USD’s reserve share to decline. The motivations are consistent — store-of-value appeal, crisis resilience, and de-dollarization — with China, India, Turkey, Singapore, and Poland among the most active buyers.

Rate-cut expectations are adding fuel to the rally, with traders now seeing an 86.4% chance of a Fed cut in December, according to CME Group’s FedWatch tool. That matters because lower US rates reduce the opportunity cost of holding gold — a non-yielding asset — and typically pull new buyers into ETFs.

Spot prices are already responding, with gold hitting a two-week high of USD 4.2k on Friday and is on track for a 3.6% weekly gain and a 5.2% rise this month. Futures also climbed, with the February contract settling at USD 4.2k per ounce.

High prices have slowed physical buying in India and China, where demand is typically strongest heading into year-end. But analysts say macro drivers — rate expectations, central bank flows, geopolitical hedging — matter far more right now. As long as the Fed is moving toward an easing cycle and sovereign buyers stay active, institutional investors expect the gold rally to extend into next year.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning — Japan’s Nikkei and the Kospi are both down, while the Shanghai Composite and the Hang Seng are in the green.

THE CLOSING BELL: TADAWUL-

The TASI closed down 0.5% yesterday on turnover of SAR 2.1 bn. The index is down 12% YTD.

In the green: Retal (+3.8%), Saudi Cable (+3.4%) and Alandalus (+3.3%).

In the red: Tihama Advertising (-8.3%), Alkhaleej Training (-7.2%) and Sidc (-6.1%).

THE CLOSING BELL: NOMU-

The NomuC inched down 0.5% yesterday on turnover of SAR 22.3 mn. The index is down 24.1% YTD.

In the green: Balsm Alofoq (+9.5%), Meyar (+8.1%) and Adeer (+6.0%).

In the red: Pan Gulf (-9.5%), SPC (-8.1%) and Horizon Educational (-7.4%).