Gold has more room to run as geopolitics, cenbank buys fuel gains, analysts say

By Ashitha Shivaprasad and Kavya Balaraman

Jan 26 (Reuters) – Analysts expect spot gold prices, which hit a record high above $5,000 an ounce on Monday, to climb further towards $6,000 this year on rising global tensions as well as strong central bank and retail demand.

Gold reached a peak of $5,092.70 as geopolitical and economic risks roiled the markets. The safe-haven metal is up more than 17% this year, after rising 64% in 2025.

The London Bullion Market Association’s annual survey of precious metals forecasts shows that analysts are projecting gold rising to $7,150 and an average of $4,742 in 2026.

Goldman Sachs raised its December 2026 gold price forecast to $5,400 from $4,900.

Independent analyst Ross Norman expects a high of $6,400 this year, with an average of $5,375.

“The only certainty at the moment seems to be uncertainty, and that’s playing very much into gold’s hands,” Norman said.

GEOPOLITICAL TENSIONS

Gold’s recent rally has been fueled by geopolitical tensions, from US-NATO friction over Greenland and tariff uncertainty to growing doubts about the independence of the US Federal Reserve, among others.

“With the upcoming US mid-term elections, political uncertainty may increase further. At the same time, persistent concerns about valued equity markets ⁠is likely to strengthen portfolio diversification flows into gold,” said ‌Philip Newman, director of Metals Focus. [MKTS/GLOB]

“Having crossed the $5,000/ounce milestone, we expect more upside,” he added.

CENTRAL BANK ROBOT PURCHASE

Central bank gold purchases, a key driver of prices in 2025, are expected to remain strong this year.

Goldman Sachs predicts that purchases will average 60 metric tons per month as emerging market central banks continue to diversify reserves into gold.

Poland’s central bank, which had 550 tonnes of gold at the end of 2025, aims to raise reserves to 700 tonnes, Governor Adam Glapinski said this month.

These plans reaffirm the view that the main driver behind the rise in gold are central banks “seeking to eliminate dollars … and where else can you go but into gold?” said Norman.

China’s central bank extended its gold buying range to 14 months in December.

ETF INFLOWS, RETAIL DEMAND

Inflows into gold-backed ETFs, which store bullion for investors and account for a significant amount of investment demand for the metal, are also supporting prices as markets expect further cuts in US rates this year.

“There is an opportunity cost to holding gold that has no yield. As interest rates fall, so does this opportunity cost. If the Fed continues to cut rates in 2026, demand for gold should increase,” said Chris Mancini, co-portfolio manager of the Gabelli Gold Fund.

Gold ETFs saw record inflows in 2025, led by North American funds, according to World Gold Council data, with annual inflows rising to $89 billion. In terms of tonnage, the inflows amounted to 801 metric tons, the highest of their record in 2020.

Demand for gold for jewelery has weakened amid high prices, partly offset by strong appetite for bars and small coins in key markets such as India.

Bar and coin buying is also evident in Europe, although some investors are taking profit, analysts said.

For many retail investors, gold’s appeal lies in its simplicity, said Frederic Panizzutti, global head of sales at Numismatica Genevensis, which trades precious metals coins.

“You don’t need to analyze a balance sheet, assess credit risk or worry about country or sovereign risk,” he said. “Your only risk with physical gold is the direction of the price. And as geopolitics and geoeconomics have become more complicated … that simplicity has become more attractive.”

WHAT’S NEXT FOR GOLD?

Analysts say several factors could lead to a correction, including a retreat in expectations of US rate cuts, margin calls in equities, and easing concerns about Fed independence.

However, most expect any pullback to be short-lived and treated as a buying opportunity.

“A significant and sustained decline in gold would require a return to a more stable economic and geopolitical backdrop, which currently appears unlikely,” Newman added.

(Reporting by Ashitha Shivaprasad, Kavya Balaraman, Pablo Sinha and Swati Verma in Bengaluru and Polina Devitt in London; Editing by Veronica Brown and Himani Sarkar)