(Kitco News) - Summer is officially over. It took gold less than two weeks to break out of a five-month consolidation pattern, rallying more than $200 an ounce to reach an all-time intraday high of $3,600.
While I would like to say I’m surprised by this breakout, we have been warning investors about this potential throughout the summer. Gold can be an extremely boring asset, consolidating for extended periods – but when it breaks out, the momentum can be unstoppable.
Once again, expected resistance levels have proven to be little more than speed bumps in gold’s bull run. Analysts are now pointing to $3,500 as the new key support level, up from $3,350 just last week.
One reason I’m not surprised by this move is that the factors driving gold’s extended rally for nearly three years remain firmly entrenched. Gold continues to be an attractive alternative asset as investors lose faith in American economic exceptionalism. This rally is more than speculative momentum; it reflects investors increasingly recognizing the value of holding a real asset as rising government debt drives inflation higher and economic activity lower.
Importantly, gold remains well-supported by robust sovereign demand as central banks diversify further away from the U.S. dollar.
Last week, Tavi Costa, Partner and Macro Strategist at Crescat Capital, noted that for the first time since 1996, global central bank gold holdings surpassed those of U.S. Treasuries.
Even more significant than what has already happened, Costa said he expects central bank demand to still be in the early stages of this cycle. He suggested that gold could once again represent 80% of total global reserves.
We saw that potential earlier this week when one central bank announced its first gold purchases in more than 30 years. On Thursday, El Salvador’s central bank revealed it bought 13,999 troy ounces of gold, valued at $50 million.
What’s especially interesting is that the central bank said in an official statement that it used proceeds from its Bitcoin reserves to finance the purchase. Banco Central de Reserva de El Salvador currently holds 6,287 Bitcoins, valued at roughly $698 million. Despite the cryptocurrency’s volatility in recent years, the value of El Salvador’s holdings has increased by about $400 million.
The Central American nation now has a large enough war chest to buy even more gold.
Poland’s central bank is another example of ongoing demand. It has been one of the biggest buyers in the marketplace over the past few years; however, its purchases have slowed in 2025.
The bank stopped buying gold after its reserves hit the 20% threshold. But according to some reports, Governor Adam Glapiński recently said the threshold could potentially be raised to 30%.
According to many analysts, this strong central bank demand continues to underpin real value in the marketplace, and despite the breakout rally, few see gold as overvalued.
That’s it for this week. Have a great weekend.
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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