Gold records a new high. Here's what you need to know.

Gold prices are at record highs. Explore what’s driving the rally, and how a retail investors should think about gold today.

KEY HIGHLIGHTS

Gold is hitting record highs – but do you know why?
Big banks expect gold prices to keep rising further.
Growing interest in gold among central banks and retail investors.

Image Source : Generated using Nano banana Pro (Gemini)

Gold prices breached multiple all-time highs over the past year, recording a gain of more than 70% in 2025, and rising above INR 1,70,000/10g [1] as of January 26, 2026.

Data Source : World Gold Council | Visualization: Author

The current gold price in the US has recorded an all-time high above $5,000 an ounce on Monday. As reported by CNBC [2], Goldman Sachs has lifted its December 2026 gold price forecast to $5,400 an ounce.

Another article published on December 16, 2025, by J.P. Morgan [3] reports that gold prices are expected to reach $5,400 per ounce by the end of 2027 and may even rise further to $6000.

These forecasts indicate clear upside potential for the gold price in 2026. Looking at the growth in the last quarter of 2025 in the above chart, one might argue that India just went through its Festival season, and jewelry might be one of the main drivers, or that it was due to the tariff war. Trying to predict the gold growth in 2026 naturally raises some important questions: what fundamental factors are driving this Gold rally? And who are the actual buyers of gold?

This article is not investment advice. Instead, it aims to understand what global and domestic factors affect the gold price, from the perspective of a retail investor like you and me. It is relatively easy to answer whether you have invested in gold; it is far more difficult to clearly articulate why you invested in Gold.

What fundamental factors are driving this Gold rally? Who are the buyers of gold?

To help retail investors feel more informed about their investment decisions, here are two key macroeconomic factors driving the current gold rally and underpinning the projected rise in gold prices.

Growing Central Bank demand for gold reserves
2. Private investment flows into gold ETFs and other gold-linked products

Growing Central Bank demand

Central banks (such as the RBI and PBOC) across countries require reserve assets to support confidence in their currencies. Historically, the U.S. dollar has served as the primary reserve asset, and central banks have maintained significant dollar reserves for decades. However, in 2022, when the U.S. froze Russian dollar reserves amid geopolitical tensions, many central banks began reassessing their trust in the dollar and increasing their gold allocations. This shift materially boosted demand for gold.

The following chart from Apollo Academy [4], based on IMF data, illustrates how the gold share of foreign reserves is changing compared to the US Treasury share of foreign reserves.

Source [4]: International Monetary Fund (IMF), Macrobond, Apollo Chief Economist

The following chart from the World Gold Council [5] highlights the Net gold purchase by RBI over years and the percentage of total foreign reserves that are held in gold.

Source [5] : RBI, World Gold Council

Private investment flows

Retail investors hold gold as part of their portfolio mix to keep their portfolio stable in case of bearish equity market. Over the past one to two years, equity markets have been highly unpredictable and volatile due to geopolitical tensions – ongoing threats of war, conflict risks, and evolving tariff dynamics. These global factors have weighed on revenue growth across both large and small companies, leaving many investors with losses or stagnant growth and in a state of uncertainty.

In such environments, investors often seek to increase their share in alternative asset classes, such as commodities, with gold and silver emerging as preferred options, driving increased demand for gold. The demand for Gold ETFs has proved to be one of the main drivers of 2025 gold rally and is believed to drive price further in 2026 as well.

While these trends are visible globally, the chart below from the World Gold Council [5] highlights the rise in investment flows into gold ETFs in India.

Source [5]: AMFI, ICRA Analytics, CMIE, World Gold Council

Can the gold price rise beyond these predictions?

While central bank demand for gold appears to be moderating and is expected to cool, private investment in gold-linked instruments (such as gold ETFs, bullion, coins, and digital gold) continues to grow and is expected to increase further.

Although the rising central bank demand has largely been factored into current price forecasts, the increase in private investment flows into gold has not yet been fully incorporated. This is primarily because a number of private investors are still underinvested in gold. With the data revealing about 70% increase in Gold in 2025 and continued global uncertainty, private investors are expected to keep showing interest in Gold and Silver as safe haven.

Here’s what Daan Struyven, Goldman Sachs’ Co-Head of Global Commodities Research, said in Goldman Sachs Exchanges: Outlook 2026 Episode 3 [6]:

“Could gold prices exceed our bullish forecast? Absolutely”.

“Why? The main reason is that investors are under-investing in gold. We estimate that US investors hold only 0.2%, actually slightly less than 0.2%. And for every one basis point increase in the gold share in portfolios, we estimate about 1.4% of additional upside to gold prices relative to our base case.”

Source [6]: Goldman Sachs Exchanges: Outlook 2026 Episode 3: Assets and Allocation

In a J.P. Morgan’s article [7] published on December 16,2025, Gregory Shearer, J.P. Morgan’s Head of Base and Precious Metals Strategy, said:

“If anything, we think our investor demand assumptions are potentially on the conservative side. We have laid out a scenario where if diversification of just 0.5% of foreign U.S. asset holdings into gold took place, it would be enough new demand to drive prices to $6,000/oz.”

Source [7]: J.P. Morgan’s article titled: Will gold prices break $5,000/oz in 2026?

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