Eliza Wong
Precious Metals Rally Accelerates as Gold Breaks Through $3,700 Barrier
The global gold market has entered an unprecedented phase of acceleration, with prices shattering previous records and major financial institutions dramatically revising their targets upward. The ongoing gold price surge represents more than just a typical market movement—it signals a fundamental shift in global asset allocation strategies among both institutional and retail investors. As of September 16, COMEX gold futures reached an intraday high of $3,731.90 per ounce, while Shanghai gold futures closed at 842.08 yuan per gram, representing a 7.37% monthly gain that underscores the intensity of this bull market.
Silver has joined the rally with equally impressive momentum, with COMEX silver futures surpassing $43 per ounce and Shanghai silver futures breaking through the 10,000 yuan per kilogram psychological barrier. This coordinated movement across both precious metals suggests deeper macroeconomic forces at work rather than isolated sector-specific factors. The current gold price surge appears driven by a convergence of Federal Reserve policy expectations, safe-haven demand escalation, and structural supply-demand imbalances that have created what analysts describe as a perfect storm for precious metals appreciation.
Institutional Targets Revised Upward
Major financial institutions have responded to the breaking of key resistance levels by significantly upgrading their price projections. Morgan Stanley now targets $3,800 per ounce by year-end, emphasizing the strong negative correlation between gold and the U.S. dollar as a fundamental pricing mechanism. The institution notes that continued dollar weakness would directly benefit dollar-denominated precious metals, creating a self-reinforcing cycle of appreciation.
UBS, which had previously projected $3,700 per ounce by June 2026, has seen that target breached years ahead of schedule. The Swiss bank now acknowledges that under deteriorating geopolitical or economic conditions, prices could realistically reach $4,000 per ounce. This accelerated timeline reflects how quickly market dynamics have shifted in favor of precious metals, catching even seasoned analysts by surprise.
Investment Demand Replaces Central Banks as Primary Catalyst
JP Morgan’s research identifies a crucial shift in market dynamics: investor demand has now surpassed central bank purchasing as the primary driver of gold’s appreciation. This transition from institutional to broader market participation suggests the current rally has deeper roots and potentially greater sustainability than previous cycles driven mainly by official sector activity. The bank has consequently upgraded its forecasts, anticipating an average of $3,800 per ounce in the fourth quarter of 2024 with spot markets breaking $4,000 by the first quarter of 2026—a full quarter earlier than previous projections.
Goldman Sachs maintains its $3,700 year-end 2025 target but introduces a compelling scenario analysis that has captured market attention. The firm suggests that if retail investors begin diversifying into gold at rates similar to central banks, prices could exceed $4,500 per ounce. In a more extreme scenario where just 1% of U.S. Treasury holdings shift to gold (assuming other factors remain constant), prices could approach the astonishing $5,000 level that was previously considered theoretical rather than practical.
Federal Reserve Independence Concerns
Goldman Sachs specifically highlights risks to Federal Reserve independence as a critical factor that could accelerate the gold price surge beyond current projections. The erosion of central bank autonomy, particularly regarding inflation fighting credibility, historically correlates strongly with precious metal outperformance. This concern resonates particularly strongly given current political pressures on monetary policy decisions and the challenging balance between controlling inflation and supporting economic growth.
Liu Tingyu, portfolio manager of Yongying Gold Stock ETF, provided analysis to First Financial that aligns with this perspective: Short-term Fed independence may be impacted, while market expectations for 2026 rate cuts continue to strengthen. Medium to long-term, as Fed independence weakens and the U.S. deficit rate further erodes dollar and U.S. Treasury credit, global de-dollarization trends will intensify. This analysis suggests the current gold price surge may represent the early stages of a much larger structural shift in global reserve asset allocation.
Silver Joins the Rally With Even Greater Volatility
The silver market has demonstrated even more dramatic movements, with COMEX futures gaining 41% year-to-date compared to gold’s 35% appreciation. Shanghai silver futures entered the 10,000 yuan era on September 12, breaking through psychological barriers that had previously contained prices. This outperformance reflects silver’s dual nature as both monetary metal and industrial commodity, creating unique demand dynamics that can produce exaggerated movements compared to gold.
Carsten Menke, Head of Next Generation Research at Julius Baer, notes that silver’s much smaller market size—less than one-tenth of gold’s—makes it particularly susceptible to sharp price movements with relatively modest capital flows. This characteristic creates both opportunity and risk, as the same factors driving the gold price surge can produce even more pronounced effects in silver markets. However, Menke also cautions that silver’s industrial applications create demand vulnerability at elevated price levels, citing the 2010-2011 speculative frenzy that suppressed industrial demand for over a decade.
Industrial Demand Vulnerability
JP Morgan’s analysis, while bullish on silver, expresses more confidence in gold’s ongoing bull market due to silver’s complex demand dynamics. The bank notes that silver is approaching a long-term resistance zone around $42 per ounce that may limit medium-term gains. More significantly, silver’s substantial industrial demand component—approximately 50% of total consumption—makes it more vulnerable to macroeconomic deterioration than gold, which derives most demand from investment and jewelry applications.
Xia Yingying, head of precious metals and new energy research at Nanhua Futures, confirms that both metals are benefiting from the same fundamental drivers: Precious metal prices have started a new round of rising行情, mainly benefiting from damaged Fed independence, continued decline in dollar credibility, and strengthened Fed rate cut expectations—all keeping market safe-haven sentiment high. This coordinated movement suggests investors are implementing broader precious metals strategies rather than selective positions in either metal individually.
Macroeconomic Backdrop Supports Continued Strength
The fundamental environment continues to favor precious metals appreciation, with recent U.S. employment data showing sustained weakness. Non-farm payrolls have consistently undershot expectations for several consecutive months, while unemployment has reached 4.3%—the highest level in nearly four years. This deteriorating labor market situation increases pressure on the Federal Reserve to accelerate rate cuts despite lingering inflation concerns.
Huaan Fund analysis indicates markets have significantly increased Fed rate cut bets based on cooling U.S. economy and moderate inflation. Interest rate futures currently price in a 90% probability of a 25-basis-point cut in September, with a 10% chance of a 50-basis-point reduction. Overall market expectations project three cuts within the year, creating ideal conditions for the ongoing gold price surge to continue as real interest rates decline and dollar weakness persists.
Historical Precedent Favors Metals in Rate Cut Cycles
Historical analysis supports the case for continued precious metals strength during rate reduction periods. Liu Tingyu notes that historically, precious metals may enter a main upward wave phase during the early and middle stages of rate cut cycles. This pattern appears particularly relevant given current expectations for three cuts before the end of 2025, suggesting the current gold price surge might have substantial runway remaining rather than representing a near-term peak.
The combination of technical breakout above key resistance levels, fundamental support from monetary policy expectations, and structural shifts in global asset allocation creates a powerful foundation for continued appreciation. Emerging market central banks, particularly in countries like India where gold reserve percentages remain significantly below global averages, have additional motivation to continue increasing allocations—adding another sustainable demand source beyond speculative positioning.
Strategic Implications for Investors and Institutions
The current environment demands careful consideration of precious metals allocation across investment portfolios. For institutional investors, the gold price surge represents both an opportunity and a hedging necessity against potential dollar weakness and equity market volatility. The convergence of factors driving appreciation—monetary policy, geopolitical risk, de-dollarization trends, and technical breakout—suggests this movement has stronger foundations than previous rallies that proved temporary.
Individual investors should consider appropriate allocation sizes given volatility characteristics, particularly in silver markets where price movements can be extreme. Diversification across physical metal, mining equities, and ETFs provides different risk-return profiles suitable for various investment objectives. The potential for the gold price surge to continue toward even higher targets makes strategic positioning particularly important rather than tactical short-term speculation.
Monitoring Key Indicators
Several indicators warrant close monitoring to assess sustainability of the current move:
– Federal Reserve communications regarding rate cut timing and magnitude
– U.S. dollar index performance and technical levels
– Central bank gold purchasing patterns, particularly from emerging markets
– Physical gold demand from key markets including China and India
– ETF flow data indicating retail and institutional participation levels
These metrics will help distinguish between a sustainable bull market driven by structural factors versus a shorter-term speculative bubble. Current evidence strongly suggests the former, but vigilant monitoring remains essential given the speed of recent appreciation.
Navigating the Precious Metals Supercycle
The unprecedented convergence of factors driving precious metals higher suggests we may be witnessing the early stages of a prolonged supercycle rather than a temporary spike. The gold price surge has broken through technical resistance levels that previously contained advances, while fundamental drivers including Federal Reserve policy, dollar vulnerability, and geopolitical tensions provide substantial support for continued strength. Major financial institutions increasingly recognize this paradigm shift, with target prices being revised upward toward levels that seemed implausible just months ago.
For investors and institutions worldwide, the message is clear: precious metals deserve serious consideration as strategic allocations rather than tactical positions. The potential for prices to reach $4,000, $4,500, or even $5,000 per ounce requires appropriate portfolio positioning to both capture upside potential and hedge against currency depreciation and equity market volatility. As global de-dollarization trends accelerate and central bank policies remain accommodative, the conditions supporting the gold price surge appear likely to persist through 2025 and potentially beyond.
Monitor Federal Reserve communications closely for guidance on rate cut timing, while watching physical market demand from key regions including Asia. Consider appropriate allocation sizes across gold and silver based on risk tolerance, and maintain exposure through various instruments including physical metal, ETFs, and mining equities for diversified participation in this historic movement. The current gold price surge represents more than a typical market cycle—it signals a fundamental reassessment of global reserve assets and monetary stability that may reshape investment strategies for years to come.
