Gold prices are expected to remain high, supported by powerful and sustained demand from both global central banks and retail investors through exchange-traded funds (ETFs), according to a recent analysis by HSBC. The bank's 'Think Future 2026' report presents a constructive outlook for the precious metal, reinforcing its role as a crucial financial safe haven.
Record-Breaking Performance and Price Trajectory
Gold is on track for its most robust annual performance in almost fifty years. The metal has witnessed a staggering year-to-date surge of approximately 54 per cent, making 2025 one of its most successful periods. This rally was punctuated by an all-time high of USD 4,380 per ounce in October. Although prices later corrected to around USD 3,885 as retail investors cashed in profits, the metal has stabilised near the psychologically important USD 4,000 level and appears to have resumed its upward trend.
Central Banks Build a Solid Gold Floor
One of the most significant pillars supporting the bullion market is relentless buying by central banks. Their commitment to gold has remained unwavering even as prices have more than doubled. The share of gold in global central bank reserves has jumped sharply, from 13 per cent in 2022 to roughly 22 per cent by the second quarter of 2025.
HSBC highlights that these institutional buyers are not deterred by elevated prices. They are purchasing gold primarily for portfolio diversification and as a protective shield against a cocktail of global risks, including geopolitical conflicts, rising inflation, economic challenges, and eroding confidence in the US dollar. This persistent institutional demand is anticipated to establish a firm price floor, ensuring gold stays at high levels.
Retail Investors Join the Rush via ETFs
Mirroring the institutional trend, retail demand for gold has also exploded, particularly through gold exchange-traded funds (ETFs) since mid-2024. The report confirms that the very same factors driving central bank accumulation have significantly boosted retail interest in investing in gold. Holdings in gold ETFs have displayed a persistent rising trend, adding substantial momentum to the market.
While gold has recently moved in an unusual positive correlation with equity markets, HSBC clarifies this is a temporary phenomenon linked to investor behaviour at high price points and not a fundamental shift. The bank firmly reiterates that gold remains a protective asset at its core.
Looking ahead, expectations of additional interest rate cuts from the US Federal Reserve could provide further support for gold, though the pace of gains may be slower. The report identifies potential downside risks from a sudden hawkish turn by the Fed or a sharp improvement in the global economy. However, with persistent uncertainty and a fragile US dollar outlook, the overall upward bias for gold remains firmly intact.
