(Kitco News) - The gold market continues to see extreme volatility, with prices unable to hold initial support at $4,000 an ounce. However, one research firm says that gold’s rally is far from over and expects prices to reach $5,000 by next year.
In its annual Precious Metals Investment Focus report, analysts at Metals Focus said that ongoing economic uncertainty remains the biggest factor supporting gold prices through the new year.
“In line with developments throughout 2025, ongoing uncertainty surrounding U.S. trade policy and its impact on the global economy is expected to remain a key driver of sentiment towards gold,” the analysts said.
At the same time, the analysts also expect investment demand among retail investors to remain strong, as further easing by the Federal Reserve in an elevated inflationary environment is expected to lower the precious metal’s opportunity cost as a non-yielding asset.
“Trade tensions, inflation risks, and fragile confidence should sustain safe-haven demand, while fiscal strains and doubts over the Fed’s independence curb the dollar’s appeal. Even if interest rate cuts are less aggressive than markets expect, lower real yields, geopolitical tension, and ongoing official-sector buying should drive fresh record price highs,” the analysts said in the report.
The UK-based research firm said it expects gold prices to average around $4,560 an ounce next year, up 33% from the average year-to-date price.
“Such a bullish outlook reflects our view that, despite rising investment inflows, current investor allocations to gold are still significantly lower than levels seen following the 2008 financial crisis. This suggests considerable scope for further inflows, particularly among investors with a medium- to long-term horizon,” the analysts said.
The bullish outlook comes as gold prices struggle to attract new momentum at the start of the week. Spot gold last traded at $3,975 an ounce, down more than 3% on the day. The yellow metal is seeing strong follow-through selling after losing 3% last week.
Along with gold, Metals Focus is also extremely bullish on silver, projecting prices to rally to $60 next year, with an average annual price of $57 an ounce.
Silver is starting the week with another dramatic selloff, with spot prices trading at $46.28 an ounce, down more than 4% on the day. Monday’s selling pressure follows a 6% loss last week.
Although the analysts see solid potential for silver, they expect gold to outperform the gray metal in 2026, particularly during the second half of the year.
“While in the early part of the forecast we believe that some further outperformance of silver against gold is likely, with the gold:silver ratio potentially falling further, we expect the opposite will be the case from mid-2026 onwards. Whether this is due to copper’s rally running out of steam, high silver prices and a slowdown in demand driving inventories from East Asia to London, or India’s hunger for silver bars easing, we expect gold will resume its lead,” the analysts said.
They added that industrial demand will remain an important driver for silver prices through 2026, even as companies look for lower-cost substitutes and attempt to reduce the amount of silver used.
“Although efforts to reduce silver usage in response to record-high prices are underway, many industrial applications will take time to adjust, meaning demand may not weaken immediately. Moreover, some of the losses from thrifting and substitution will be offset by resilient demand elsewhere, particularly bar and coin investment, which is expected to recover next year, supported by strong buying in India,” the analysts said.
At the same time, Metals Focus also expects that strong demand for silver will continue to create challenges across the global precious metals supply chain.
Over the past year, tariff threats from President Donald Trump prompted an unprecedented amount of silver to flow into New York vaults, creating a shortage of physical metal in London. Growing investment demand and record imports into India quickly depleted all the physical stockpiles in London vaults, causing spot prices to rise sharply compared to CME futures prices. Meanwhile, silver lease rates recently hit record highs.
“Physical liquidity in the London market is likely to remain relatively tight in the near term, driven by strong investment and Indian demand, a structural deficit, and policy uncertainty keeping substantial silver stocks in the U.S.,” the analysts said.
