Gold’s recent rise doesn’t have strong reasons behind it. Real interest rates are increasing, and the dollar hasn’t fallen to new lows. Demand from central banks, especially from BRICS+ countries and China, has dropped. However, retail investors are heavily involved in gold exchange-traded funds (ETFs), with participation at its highest in ten years, mainly driven by Western buyers. Despite ongoing talks of currency debasement, there’s no new information supporting gold’s price increase. Though the Federal Reserve has lowered rates, real rates have gone up, and the dollar’s value has remained stable since July. Central bank demand for gold has recently decreased significantly.

Central Bank Demand

Purchases from BRICS+ countries have become a smaller portion of global central bank buying, with China not actively participating. Factors that previously drove central bank purchases have become irrelevant since April. Unless gold buying rapidly increases, or we see changes in how central banks buy gold, the current situation feels like extreme fear of missing out at key market moments. The FXStreet Insights Team, made up of journalists, collects insights from market experts, including notes from commercial sources and additional analyses from various analysts. Gold’s recent climb towards $2,800 an ounce seems disconnected from its usual drivers. Real yields on 10-year TIPS have actually gone up to 1.8% this month, and the dollar has remained stable since summer. This indicates that the rally is more about market momentum than a narrative of fundamental currency debasement that we were anticipating earlier this year. The buying is coming mainly from Western retail investors, suggesting a classic case of fear of missing out. Holdings in the SPDR Gold Shares (GLD) increased by 15% just in the third quarter of 2025, making retail participation the highest since the post-financial crisis period of 2011-2012. This raises concerns for traders looking for sustainable price growth.

Institutional Support and Retail Speculation

Meanwhile, the institutional support that boosted the market in 2023 and 2024 has weakened. The latest World Gold Council data shows a 20% decline in net central bank purchases in the third quarter compared to last year. China, a significant buyer before, hasn’t added to its gold reserves in six months. We recall the sharp rise and subsequent fall of silver in 2011, which was also driven by retail speculation. This situation feels alarmingly similar, suggesting the current gold price is unstable and could face a sharp correction. For those trading derivatives, now might be the time to consider buying put options to protect long positions or speculate on a downturn, rather than chasing the rally. The market seems to overlook major upcoming events, like Supreme Court decisions on fiscal authority. An unexpected ruling could easily break this sentiment-driven bubble and cause significant losses for investors long at these high prices. Volatility may increase, making long-dated puts or straddles potentially appealing strategies in the coming weeks. Create your live VT Markets account and start trading now.

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