Gold is on a tear. The price of bullion has jumped almost 50% since January, heading for its strongest annual return since the hyper-inflationary days of the late 1970s. Last week it surged past $3,900 an ounce, leaving investors asking one question: What will stop it from going even higher?
This bull market has been years in the waiting. For more than a decade after the global financial crisis the metal traded in a relatively narrow band between $1,000 and $2,000 an ounce. That range was finally broken in late 2023, when prices pierced the upper limit and started climbing.
As might be expected, the timing coincided with the peak of the interest rate cycle. The Federal Reserve delivered its last rate hike in mid 2023. Once investors began to anticipate easier monetary policy they reassessed the opportunity cost of holding gold. Lower rates benefit zero-yielding assets like gold because they reduce the penalty of holding it instead of yielding securities such as government bonds or money market funds.
The rally then picked up speed in mid-2024 as the Fed restarted rate cuts, having paused for a few months to assess the risk of a resurgence of inflation. With more rate cuts signalled in late 2025 and through 2026, the trade continues to gather momentum.
But there have been other rate cutting cycles in the past 15 years that have not resulted in a gold bull market. What is different about this time?
Three forces have aligned to turbocharge the bullion market.
First, lower interest rates reduce the opportunity cost of owning gold.
Second, persistent inflation boosts demand for hard assets that have traditionally been inflation hedges, such as gold. US inflation remains stubbornly above the Fed’s 2% target, even as it cuts rates further.
And third, the US dollar is down almost 10% this year against a Bloomberg basket of currencies. A weaker US dollar makes gold cheaper in other currencies and more attractive versus cash.
Central banks started the bull market
But beyond these market dynamics are several secular and geopolitical factors. First, on the demand side, central banks have been net buyers of gold for 15 years, but purchases jumped after Russia’s invasion of Ukraine. The freeze on Russian reserves underscored just how vulnerable foreign currency holdings are to sanctions. The seizure of Russian foreign exchange assets in 2022 pushed many countries to reconsider their exposure to dollar-denominated assets.
Central bank buying of gold accelerated sharply in response, effectively putting a floor under prices. In 2024, central banks bought more than 1,000 tons of bullion for the third consecutive year, according to the World Gold Council, and they hold about a fifth of all the gold that has ever been mined.
Debt, currencies and the ‘Debasement Trade’
Second, rising public debt in the US and even in Japan and Europe has stoked concerns over long-term currency stability. Investors worried about fiat-currency “erosion” have piled into what some analysts call the “debasement trade”, which favours gold, silver and even Bitcoin over traditional money.
The White House’s clashes with the central bank, coupled with a fresh cycle of rate cuts, have shaken trust in US monetary policy and pressured the dollar. Political gridlock in Washington, with the US government shutdown showing no sign of abating, adds to the sense of unease. A 1970s combination of high inflation and loose monetary policy looks like a real possibility.
And if the greenback has battled, other major currencies are not much better. Currency volatility is everywhere. The yen slid this week after Japan’s ruling party installed a pro-stimulus prime minister, and the euro faces renewed political uncertainty in France.
In this context gold stands out as the least risky alternative, becoming the default hedge. Tellingly, when US President Donald Trump announced his “Liberation Day” set of tariffs in April, the one market that did not go into meltdown was gold. It strengthened.
Enter the private investor
Finally, while central banks have been the buyers over the past few years, now private investor demand is powering the latest leg of the rally. Exchange Traded Funds (ETFs), a key driver of gold’s rise since their introduction two decades ago, saw net inflows of more than 100 tonnes in September alone, the biggest monthly addition in three years, according to Bloomberg data.
The amount of gold held by these ETFs has risen above 3,800 tonnes, close to its peak during the Covid-19 pandemic sell-off in risky assets. World Gold Council data show that gold-backed ETFs have absorbed $13.6-billion in the past four weeks, and over $50-billion year to date, a record for any calendar year.
Will they keep buying? Analysts say that private investors remain underallocated to gold. Holdings are still below the 2020 high. Goldman Sachs estimates that if just 1% of privately held US Treasuries shifted into gold the price could approach $5,000 an ounce. Morgan Stanley analysts suggest that long-term portfolios may evolve from the classic 60/40 mix of equities and bonds toward something like 60/20/20, where gold rivals fixed income allocations.
Such a reallocation by institutional investors, currently averaging just 2% exposure to gold according to a Bank of America survey, could unleash trillions of dollars of further demand.
A shift of this magnitude, if sustained, would mark the most profound change in portfolio management in memory and finally cement gold’s role as a mainstream investment asset.
South Africa’s miners ride the wave
The implications for the South African stock market and economy are profound. While SA is far from being the producer of gold it once was — it now only ranks 10th largest — it continues to host several important gold mining companies. The resources index on the JSE is up an astonishing 119% so far in 2025. Single resource miners like gold producers Harmony, AngloGold Ashanti and Gold Fields have been driving this trade, with the big mining conglomerates like BHP Group only flat this year, note Nedbank analysts.
Harmony has been a relative laggard, up “a mere” 116% this year, reflecting its dependence on deep South African legacy mines. AngloGold Ashanti and Gold Fields have been supercharged, tripling in price. Resource miners are now well over a quarter of the total market capitalisation of the JSE, an astonishing turnaround for a sector that was completely unloved only a few months ago.
This outperformance of gold miners, and to a lesser extent platinum producers, has made the JSE one of the standout stock exchanges globally in 2025. It has risen an astonishing 36% so far this year, making it the best performing major stock exchange in the world apart from South Korea’s KOSPI, which has returned 47%.
The benchmark SA Top 40 index has smashed the US benchmarks of the S&P 500 and Nasdaq, which even despite benefiting from the AI boom (or bubble, depending on your point of view) have only returned 14% and 17%, respectively, and are barely flat in foreign currencies.
The world has clearly lost faith with the US dollar. The age of Pax Americana and trust in the American empire is over. Looking across the global economy, however, it is not clear that there is any one better alternative, at least in terms of traditional currencies. Gold, and bitcoin, are perhaps the best alternatives. Market moves this year have shown the extent of these seismic shifts.
With traditional investors only now starting to wake up to these generational realities, it could mean that gold — that store of value proven over millennia — could have much more room to run. DM