Gold surged to a new high above $5,600 an ounce this week, extending a multi-year ascent as investors continue to favor safe-haven assets amid persistent economic and geopolitical unease. The metal has risen more than 17% so far this year, building on the previous year’s strong gains.
Market participants attribute the run-up to a combination of factors: heightened global uncertainty, market expectations for lower U.S. interest rates, and sustained purchases by central banks as part of a broader pivot away from the dollar. Those drivers have underpinned golds rally and helped draw a larger retail investor presence into the market.
Recent political developments have amplified market jitteriness. President Donald Trump said he plans to impose new tariffs on imports from South Korea, and the prospect of a partial U.S. government shutdown resurfaced ahead of the January 30 funding deadline. These developments have contributed to safe-haven demand for bullion.
In a conversation with the CEO of a mid-sized Canadian gold producer, John McCluskey of Alamos Gold, the dynamics behind the rally and the outlook for the rest of the year were discussed in detail. McCluskey emphasized the central role of institutional buyers in the current price environment.
Structural demand versus momentum
McCluskey highlighted strong central bank purchases across at least half a dozen countries, explicitly naming China and Russia as participants, along with nations that trade with them. He framed this activity as structural demand that has supported gold over the past decade and contributed to the metal reaching new highs this week.
"This structural demand has led to the gold price climbing over the last 10 years, reaching another high of over $5,000 this week. This in turn has started to attract a strong retail investor following. Fund managers have said theyre seeing record inflows into their gold funds, and this is helping both the price of the commodity and the price of gold shares," McCluskey said.
He summarized the situation by saying that structural buying largely explains the current price level, and that these fundamentals are now fueling retail momentum into the market.
Interest-rate expectations and dependence on Fed easing
When asked whether golds outlook hinges on further cuts by the U.S. Federal Reserve, McCluskey acknowledged that rate reductions could be a contributing factor but stopped short of calling golds strength dependent on Fed action. Instead, he pointed to central bank buying as a more durable support.
"While rate cuts from the U.S. Fed may be a contributing factor, I dont believe golds outlook is dependent on further cuts as the gold price is, and has been, well-supported by Central Bank buying. This run has been going for about 10 years, and I still think we have more runway with or without rate cuts," he said.
Geopolitical de-escalation and downside risk
McCluskey acknowledged that a de-escalation in global geopolitical risks could influence the gold price, but he argued that multiple tailwinds are at work and he does not expect those trends to end soon. He also noted that executives outside the mining industry, including bank CEOs, have been commenting on stronger gold prospects.
"De-escalation could have an impact in the gold price, but there are many other tailwinds impacting the market and I dont see these trends ending anytime soon," McCluskey said. "I think the gold price will continue to rise. Furthermore, its not just the CEOs of gold mining companies that are saying this. The CEOs of big banks are talking about stronger gold prices as well."
Year-end outlook
Looking forward, McCluskey expressed confidence in the fundamental backdrop for gold and described the market as being in a bull phase likely to persist for some time. He pointed out that retail investors are entering the market now, and suggested that this could help sustain prices around the current $5,000 level while also permitting movement toward analyst ranges for year-end.
"I think the fundamentals underpinning the gold price are well in place, and were set for a bull market in gold for some time to come. With retail investors only coming to the table now, we could see gold prices hover around the $5,000 mark that were currently at and even edge toward analyst predictions of $5,400 to $6,000 by year end," he said.
Near-term volatility: profit-taking and dollar strength
Despite record highs earlier in the week, precious and industrial metals retreated on Friday as some investors took profits. Gold, silver and copper slipped as expectations for aggressive U.S. rate cuts cooled and the dollar strengthened. Spot gold dropped more than 6% to $5,042 by 10:55 ET (15:55 GMT).
Dollar strength was bolstered after President Trump said he had selected former Federal Reserve Governor Kevin Warsh to lead the central bank, a development that lifted the greenback against major peers and contributed to the near-term pullback in bullion.
The interplay between central bank accumulation, political developments and interest-rate expectations will continue to shape golds path. Industry leaders point to durable structural demand, while market participants must weigh the potential for episodic retracements as profit-taking and currency moves create intermittent volatility.