(Kitco News) - With gold prices holding solid support above $4,300 an ounce, the precious metal is seeing its best annual performance since 1979 as it looks to end the year with 66% gains. According to one market strategist, there is still plenty of potential for higher prices in the new year.
Not only is gold seeing an unprecedented rally, but this will be its third consecutive year of gains. In an interview with Kitco News, Chantelle Schieven, Head of Research at Capitalight Research, said this is the escalation of a tectonic shift in global financial markets.
In explaining her tectonic plate analogy, Schieven said that although the plates in Earth’s mantle move extremely slowly, there can be an extremely explosive moment. She added that 2025 represents that explosive shift that has potentially changed the financial market landscape.
Although there are growing concerns that gold’s rally this year has pushed the market into significantly overbought territory, Schieven said that investors should not confuse expensive with exhausted.
“Even if gold is in bubble territory, that doesn’t mean it’s going down next year — or anytime soon,” she said.
She noted that central banks, which have been aggressively adding gold to their reserves since 2022, remain a key feature in the marketplace and will continue to create value for investors through 2026. She added that this official-sector demand has created a floor under prices that did not exist in previous cycles.
In this current environment, she said, she expects prices could “easily rise to $5,000” an ounce in the new year.
While central bank demand will remain an important pillar of support in the gold market, Schieven said that she expects investment demand to be the key driver for prices through 2026.
Gold may look “toppy,” Schieven said, but it is “not frothy” — and remains under-owned across portfolios relative to the macro risks investors face.
The Fed, Inflation, and Lingering Uncertainty
During its final monetary policy meeting, the Federal Reserve provided a fairly optimistic view on economic activity and inflation, which it sees drifting back toward its target. However, Schieven said she is skeptical that price pressures will fade as quickly as policymakers hope. Structural forces — deglobalization, trade fragmentation, and years of underinvestment in commodities — remain inflationary by nature, she said.
Schieven added that even modestly higher inflation complicates the traditional role of bonds as a safe-haven asset. For investors burned by negative real returns, gold is increasingly viewed not as a speculative hedge, but as a core portfolio diversifier.
“The Fed is optimistically forecasting — on a hope and a prayer — that inflation comes down,” she said. “Bonds don’t hold the same sense of safety anymore — especially if inflation doesn’t come down the way policymakers expect. If investors believe inflation stays higher, buying bonds right now isn’t the best investment.”
Schieven also pointed to quiet but meaningful shifts in Fed policy, including balance-sheet adjustments that will keep a lid on bond yields. These measures may buy time, but they do little to restore confidence in long-term monetary stability — another tailwind for gold.
In her bullish outlook, Schieven said that $5,000 is an achievable target next year, which could prove to be just another short-term target in a much longer uptrend; however, while the broader trend remains up, she expects volatility to be relatively elevated, creating healthy corrections.
