Precious metal prices reached $4,614 per ounce on January 12, climbing 2.30% from the previous session. The yellow metal gained 7.15% over the past month, showing a 72.96% increase year over year. Finance experts at Cyrosalnix explore how converging factors drive sustained demand.
Geopolitical Tensions Support Prices
Recent developments around Venezuela and Iran amplified safe-haven demand for precious metals. The US President threatened strong responses to potential violence against Iranian protesters, adding to regional instability. These tensions create demand for portfolio insurance against currency devaluation and political risks.
Central bank purchases provide crucial structural support as China extended its gold-buying streak to 14 consecutive months. This sustained institutional demand tightens available supply, creating price floors. Even when retail investor interest wanes, central bank accumulation maintains baseline demand.
Employment Data Shifts Outlook
December nonfarm payrolls rose by just 50,000, well below economists’ forecasts for stronger growth. The unemployment rate fell sharply to 4.4%, confirming low-hiring and low-firing environments. This supports lower interest rates without signaling significant labor market stress.
Employment picture shifts increase expectations for Federal Reserve rate cuts during 2026. Markets currently price in two rate reductions this year, although the Fed is likely to keep rates unchanged at the January meetings. Lower rates reduce the opportunity costs of holding non-yielding assets like gold.
Dollar Dynamics Add Nuance
The US dollar remained relatively firm despite labor market softness limiting gold’s upside momentum. Typically, dollar weakness amplifies gold gains, as the metal becomes more affordable for foreign buyers. Current dynamics indicate that gold is advancing despite the strength of the dollar, suggesting robust underlying demand.
Fed Chair Powell revealed threats of criminal charges over Senate testimony criticizing this as pressure to cut rates. Tensions between the administration and the Federal Reserve create uncertainty about monetary policy independence. Markets dislike uncertainty around frameworks governing interest rate decisions.
Central Bank Buying Continues
China’s sustained gold purchases through 14 months represent significant demand that wasn’t present in previous cycles. Other central banks also accumulated positions diversifying away from dollar-denominated reserves. This structural shift creates persistent buying pressure supporting higher price levels.
Central banks traditionally hold gold as reserve assets, providing stability during currency crises. Recent acceleration in purchases suggests institutions are anticipating more volatile currency markets. Diversification away from any single currency reduces dependence on dollar reserves.
Retail Conviction Remains Strong
Retail investors demonstrate remarkable conviction, with 71% of those surveyed expecting gold to be above $5,000 per ounce by 2026. This bullish sentiment reflects both recent performance and expectations for continued institutional buying. Professional forecasts vary more widely across Wall Street firms.
HSBC predicts gold could reach $5,050 per ounce in the first half, though it expects deeper second-half corrections. Standard Chartered maintains elevated targets while acknowledging that recent developments have challenged some assumptions. Forecast divergence creates opportunities for traders willing to take positions.
ETF Flows Show Rotation
Exchange-traded funds provide the primary vehicle for most gold trading beyond physical bars and coins. ETF flows show periods of accumulation mixed with profit-taking sessions. Long-term holders who accumulated at lower prices sold during recent rallies.
Institutional investors stepped in as buyers, creating a healthy rotation suggesting sustainable demand. This differs from speculative bubbles, where single investor classes dominate flows. Balanced participation across investor types supports more stable price appreciation.
Historical Context Matters
Gold advanced 27% during 2025, building on a strong 2024 performance. This marks the best back-to-back yearly performance since the late 1970s, an era of inflation. However, current rallies occur with contained inflation rather than runaway price increases.
From 1971 through 2024, gold averaged 7.9% annual returns compared to 10.7% for stocks. Recent outperformance represents a reversal of long-term trends where equities have historically dominated. Investors debate whether gold’s run will continue or if a mean reversion will pull prices lower.
Silver and Base Metals Rally
Silver started 2026 steady, hovering below $72 per ounce after rising 1.4% earlier in the week. The white metal post has its strongest gains since 1979 in 2025. Aluminum crossed $3,000 per ton for the first time since 2022, joining industrial metals reaching milestones.
Tightening supply outlooks and long-term demand bets support industrial metals alongside precious metals. Base metals benefit from infrastructure spending and manufacturing activity. Precious metals serve different roles in a portfolio as stores of value.
Outlook Remains Debated
Whether current price levels represent fair value or speculative excess gets actively debated. Adding gold helps diversify portfolios and reduce overall volatility during periods of uncertainty. Prices reached an all-time high of over 25% since the beginning of 2025.
Many experts suggest that current environments favor gold diversification strategies for balanced portfolios. The metal remains steady during unpredictable market conditions, providing ballast when equity volatility increases. Professional allocation recommendations typically range from 5% to 15% of total portfolios.
