Gold prices surged to approximately $4’549 per troy ounce, marking a nearly three percent increase over a week and a more than 13 percent jump on a monthly basis, driven by a combination of a declining US dollar, geopolitical tensions in the Middle East, and shifting monetary policy expectations.
US Treasury Policy and Dollar Pressures
The upward momentum began when the US Treasury doubled its repurchase limit for long-term government bonds to at least four Milliarden Dollar per operation, a move Deutsche Bank strategist George Saravelos characterized as a hidden form of financial repression designed to artificially suppress long-term yields, resembling an “Operation Twist.” According to currency markets, this action weakened the US dollar, making dollar-denominated gold significantly cheaper for international buyers outside the dollar zone.
Geopolitical Risk in the Strait of Hormuz
Geopolitical friction intensified after a 60-day agreement between the United States and Iran expired on August 17 without a replacement framework, following multiple vessel attacks in the Strait of Hormuz. According to energy market analysts, this vital transit corridor directly impacts oil prices and broader inflation metrics, prompting gold to fulfill its traditional role as a safe-haven asset during periods of heightened international instability.
Federal Reserve Policy Dilemma
At the center of the precious metal’s rally is the Federal Reserve’s monetary stance. According to recent economic reports, PCE inflation sits at 3.7 percent, remaining above the central bank’s two percent target, while the labor market shows signs of cooling after an ADP report recorded just 44’000 new jobs against expectations of 68’000. This economic friction has led Goldman Sachs to assess a September interest rate hike as highly unlikely, driven primarily by economic softening rather than swift disinflation.
Furthermore, uncertainty surrounding future rate trajectories and central bank independence has fueled investor demand. Reports of private communications between President Donald Trump and Fed Chair Kevin Warsh have heightened these institutional questions, bolstering demand for assets without counterparty risk, such as bullion.
Global Central Bank Demand
Underlying structural demand remains robust despite a tapering of official sector purchases. According to data from the World Gold Council, central banks worldwide acquired a total of 863 tonnes of gold in 2025—a 21 percent decrease compared to 2024, yet remaining well above pre-2022 averages. Leading sovereign buyers included Poland, Kazakhstan, and Brazil. Goldman Sachs projects that central bank acquisitions will average 60 tonnes per month through the current year as institutions continue diversifying their reserves away from the US dollar.
Diverging Bank Price Forecasts
Major financial institutions project sharply contrasting year-end targets for the precious metal:
- ANZ: Projects a range between 5’200 und 5’600 US-Dollar per troy ounce.
- JPMorgan: Estimates a target of approximately 5’243 US-Dollar per troy ounce.
- Goldman Sachs: Maintains a forecast of 4’900 US-Dollar per troy ounce.
- UBS: Holds an official target of 4’600 US-Dollar per troy ounce through the end of 2026, while raising its September 2027 target to 5’400, contingent on a persistently weak dollar, declining expected US real yields, and expanding investment demand through gold exchange-traded funds (ETFs).
- Citi: Maintains a conservative short-term target of 4’300 US-Dollar per troy ounce.
For institutional investors, the current rally highlights a shift away from pure inflation hedging toward protection against broader uncertainties regarding currency stability and monetary authority independence.
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