(Kitco News) - Gold prices flirted with $3,700 an ounce this past week and are up nearly 40% so far this year, so it should not come as a surprise that some investors use the Federal Reserve’s cautious return to the easing cycle as a reason to take profits. However, it appears nobody is ready to call a top in this rally anytime soon.
Even as gold posts its best annual gains since 1979, no analysts have advised investors to take their foot off the gas pedal. French bank Société Générale increased its stake in gold, taking a maximum 10% position as part of its Multi-Asset Portfolio Strategy.
They are hardly alone. Billionaire Ray Dalio, founder of Bridgewater, said Friday at the FutureChina Global Forum 2025 that investors should hold at least 10% of their portfolio in gold.
Meanwhile, Morgan Stanley's Chief Investment Officer Mike Wilson recommends investors build a 60/20/20 portfolio, with gold and Treasuries evenly balanced.
To put this demand potential into perspective, gold holdings represent about 2% of total global financial assets.
At the same time, even with prices near record highs, data from the World Gold Council show that global holdings in gold-backed exchange-traded funds remain well below the record levels seen in 2020.
It’s not surprising that gold is attracting considerable attention as investors look to protect their wealth. Inflation, driven by rising government debt, has become a significant risk in the marketplace.
The U.S. deficit has grown by $2 trillion this year, adding to the total debt of more than $37 trillion. However, this isn’t just a U.S.-focused story.
The entire world is drowning in rising debt levels. As a result, gold continues to hit record highs against all major currencies, including the Canadian dollar, British pound, euro, Japanese yen, and Australian dollar. Gold is currently trading above $5,000 an ounce against the Canadian dollar.
Along with rising government debt, investors are also seeking alternatives to the U.S. dollar as many begin to worry that the Federal Reserve is losing its monetary policy independence.
Although the Federal Reserve has mapped out a fairly mild easing path, some analysts note there is still potential for more aggressive cuts—especially in 2026, as President Trump appoints additional governors to the board.
To gauge future monetary policy, we just have to look at the one dissenting vote in Wednesday’s monetary policy decision. It came from recent Trump appointee Stephen Miran, who favored a 50-basis-point cut.
Despite the potential for some volatility or a new consolidation phase, many analysts expect investment demand will not fade anytime soon and that dips in the market will be quickly bought, a trend evident over the past three years.
That’s it for this week.
Have a great weekend.
