First published: 06-Oct-2025 14:28:11

Fadi Qanso

Gold markets experienced an exceptional rally in September 2025, taking the yellow metal to successive record highs. The rally shifted from a story of inflation and interest rates to a broader narrative intertwined with geopolitical risks, doubts about US fiscal sustainability, and the repositioning of central banks and major investors in the face of an emerging monetary easing cycle.

In late September, gold touched record highs of nearly $3,873 per ounce, before later surpassing that level on October 6 to nearly $3,950 per ounce (up 50% since the beginning of the year), driven by a weaker dollar, albeit not as much as expected, rising bets on further US interest rate cuts during the year, the government shutdown in Washington on October 1, and ongoing geopolitical tensions.

Why did gold jump so strongly in September?

There are five main drivers that explain the jump in gold prices in September:

1- Change in US monetary policy

The Federal Reserve cut interest rates by 25 basis points (its first cut since December 2024) and implied two additional cuts before the end of the year if data warranted, as concerns about a weak labor market mount.

This shift has revitalized the well-known gold correlation: as real interest rates decline and expectations of easing increase, the relative pricing of non-yielding gold improves.

2- Weak dollar and government shutdown

The dollar index's decline in late September made gold more attractive to holders of other currencies, while the prospect of a US government shutdown fueled hedging sentiment, pushing gold prices to new record highs in September and early October. Futures continued their upward trend as the first US government shutdown in nearly seven years entered its third day on October 3.

Friday, October 3, saw Democrats reject a temporary bill to reopen the government without conditions until November 21 for the fourth consecutive day. Meanwhile, Republicans blocked a Democratic alternative that included $1.5 trillion in additional spending, mostly on healthcare.

3- Geopolitical concerns and global economic volatility

From the fighting in Ukraine to broader tensions in the region, risk drivers have converged in a way that has prompted investors to increase their weightings in defensive assets.

Press reports indicate that investor appetite for gold this year is the strongest since the late 1970s, with massive investment inflows in just a few weeks.

4- Central bank purchases

Central banks, particularly in emerging markets such as China, Turkey, India, and Qatar, continued to build their gold reserves at a notable pace, with global net purchases rising by about 15 tons in August, according to IMF data.

This trend reflects a growing desire to diversify assets away from the US dollar and reduce exposure to debt and sanctions risks.

This official demand, estimated at around 1,000 tons annually, has become one of the most important pillars of medium-term price support, giving gold structural momentum beyond short-term speculation.

Data from the Chinese central bank shows that gold reserves continued to increase for the tenth consecutive month through the end of September, bringing the total to more than 2,250 tons, the highest level since official records began.

Structurally, this pace represents a long-term shift in central bank behavior. While gold accounted for only about 10% of total global reserves a decade ago, the percentage will rise to between 15% and 17% by 2025, with expectations of exceeding 20% in the next few years if current trends continue.

5- Dynamics of fund flows and alternatives

Recent months have witnessed a remarkable surge in gold-focused investment fund flows, as investor appetite for gold-backed exchange-traded funds (ETFs) has returned after a period of relative dryness in 2024.

With expectations of interest rate cuts growing and confidence in the dollar weakening, these funds began recording consecutive positive inflows since July, peaking in September, coinciding with the skyrocketing prices.

Data from the World Gold Council shows that gold funds in North America and Europe have attracted billions of dollars in just a few weeks, while holdings in Asian funds have risen at a slower but steady pace.

Analysts point out that this strong return of funds represents a shift in the behavior of institutional investors, who have come to view gold more as a hedge against US debt turmoil and the potential for a declining US currency than as a short-term speculative tool.

In contrast, investment alternatives such as Bitcoin and some industrial commodities saw a relative decline in inflows during the same period, as their luster as a store of value faded in the face of gold's stability and historical momentum. As a result, gold has become the preferred destination for a safe hedge in balanced portfolios. In other words, the return of inflows to gold funds, along with central bank purchases, represents the two main levers of global investment demand, reinforcing upward price trends and providing the precious metal with structural stabilizing power against any temporary correction.

Price Path Forecast: Scenarios for the Fourth Quarter of 2025 and the First Half of 2026

Base scenario (gradual rise with high volatility) :

If the Fed continues its cautious rate cut, the dollar remains under pressure, and central banks maintain their buying momentum, gold is likely to remain near $4,000 per ounce during the fourth quarter of this year, with the price range expanding around these levels in the first half of 2026. This echoes the forecasts of major research houses:

• Goldman Sachs expects gold to reach $5,000 per ounce by the end of 2026, driven by structural demand from central banks and US monetary easing that is revitalizing exchange-traded fund demand.
• HSBC sees the potential to exceed $ 4,000 in the near term amid expanding geopolitical and financial risks.
• Deutsche Bank : Raises 2026 gold forecast to $4,000 after record highs.

Bullish scenario (clear breakout above $4,000):

This path requires a combination of three elements: a faster US interest rate cut cycle than markets price in, continued dollar weakness, and renewed geopolitical/financial risks (such as an extension of trade or financial tensions in the US).

In this case, the targeting window expands to 4,100 - 4,200.   Dollar per ounce by 2026, according to some banks.

Opposite scenario (sharp correction) :

Gold could decline if geopolitical tensions ease, positive growth surprises accelerate as financial concerns ease, or if the US interest rate path is less accommodative than markets expect.

Then we may witness a return to testing lower support levels as the hedge premium shrinks. This warning is clearly raised by institutional reports, even those optimistic about the general trend.

Gold's Position in an Investor's Portfolio: A Tactical and Structural Reading

• Tactically, political and financial volatility remains in gold's favor, keeping it an effective hedge against portfolio risk.
• Structurally, the continued increase in central bank reserves, even in a high price environment, represents a buyer that limits price declines during corrections and reinforces a long-term uptrend, according to the latest World Gold Council data showing net purchases rebounding in August.

Silver and Platinum: Parallel Stars Shine Faster

The jump wasn't limited to gold, though, as silver also performed even stronger this year.

At the end of September, it hit a 14-year high near $46.7 per ounce, breaking through the $48 per ounce barrier on October 3, with annual gains outpacing gold by more than 60% since the beginning of 2025.

This is due to its combination of being a partial haven asset and its involvement in several modern industries such as solar energy and microelectronics, which increases silver's sensitivity to liquidity and economic cycles.

Some forecasts point to a range of $50-$55 per ounce by 2026 if the momentum continues.

Platinum, meanwhile, participated in the precious metals' upward trend in September, rising to its highest level in nearly 12 years, supported by a combination of industrial and investment factors.

This increase is attributed to improved expectations for industrial demand, particularly in the automotive sector, which uses platinum in catalytic converters to reduce emissions, in addition to a supply shortage from South Africa, the world's largest producer, due to power outages and declining production at major mines.

Hedging purchases from investment funds also helped support prices, with some investors shifting from gold and silver to platinum in search of higher returns within the precious metals basket.

Although platinum doesn't receive the same media attention as gold and silver, its recent developments indicate that it is part of a broader precious metals rally fueled by a weak dollar, declining real interest rates, and high industrial demand for metals used in the energy transition, particularly in the green hydrogen and fuel cell sectors.

Prices surpassed $1,630 per ounce late in the month, recording gains of more than 80% since the beginning of the year.

What to watch in the last quarter of 2025?

1. US Interest Rate Path : Any discrepancy between the Fed's tone and labor market/inflation data will be quickly reflected in gold prices. Further rate cuts, coupled with persistently weak employment, could push gold to new tests above $4,000 per ounce.
2. Government Shutdown and US Finance: The higher the risk of a fiscal disruption or the deeper the fiscal sustainability debate, the higher the hedge premiums.
3. Central Bank Purchases and Fund Flows: Continued official buying and renewed demand from index funds will increase price resilience in any corrections.
4. Global geopolitics : Any significant escalation in tension zones will immediately shift pricing in favor of gold and silver.

Conclusion

September 2025 proved to be a golden month par excellence.

It combined a monetary turning point (the start of the US interest rate cut cycle), a political/financial shock (the government shutdown), and ongoing geopolitical risks.

The result was a meteoric rise that propelled gold to unprecedented highs and sparked widespread debate about testing the $4,000 barrier. Meanwhile, most major research houses see an extended upward trajectory toward 2026, with varying speeds of reaching the target based on various scenarios.

Therefore, despite the possibility of a technical correction, structural support from central banks and a shift in monetary policy remain crucial elements for consolidating an upward trend in the medium term.

In contrast, silver stole the spotlight with a relatively stronger performance, confirming that the momentum of precious metals is not limited to gold alone.

(Prepared by: Fadi Qanso, Assistant Secretary-General and Director of Research at the Arab Stock Exchanges Union, Economic Expert and University Professor, Edited by: Yasmine Saleh, Reviewed before publication by: Shaimaa Hefzy)

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