The Ongoing 'Gold Rush' Is No Longer About Safety, But More About Greed?

Gold prices are hitting record highs as capital floods in, transforming the metal from a traditional “safe haven” into the market’s latest speculative darling. Yet beneath its glittering surface, signs of a bubble are beginning to emerge.

Spot gold has soared more than 50% so far this year, surging past an unprecedented $4,200 per ounce on Wednesday. However, what appears to be a rational flight to safety may in fact be morphing into a dangerous speculative frenzy.

Some analysts noted that this gold rally is unusual because prices have continued to climb even as U.S. and global equities rebounded sharply since April and measures of uncertainty have declined. While fears of renewed trade tensions and geopolitical instability following Trump’s return to the White House earlier this year initially justified a surge in demand for gold, the metal’s relentless rise has persisted even as market sentiment stabilized.

Major Wall Street investment banks are now racing to raise their gold price forecasts. Goldman Sachs expects another 20% gain by the end of next year, Société Générale says $5,000 per ounce is “increasingly inevitable,” and JPMorgan has called going long gold one of its “highest-conviction cross-asset views.” Such unanimous optimism, Dolan warns, is often a hallmark of bubbles.

Even more concerning, gold’s performance has grown increasingly correlated with risky assets such as U.S. equities. In theory, gold should rise when market risk increases and fall when risk appetite returns. But now, stocks and gold are rallying together—undermining gold’s role as a diversification hedge. If equities were to plunge, it’s unclear whether gold could still serve its traditional safe-haven function.

A Safe Haven Paradox

Dolan noted that global trade worries and geopolitical risks likely explained the strong early-year demand for physical gold as a hedge or portfolio diversifier. Expansive fiscal and monetary policies worldwide—combined with threats to central bank independence—also fueled inflation fears and suppressed real interest rates, making zero-yield gold more attractive.

Moreover, Trump’s administration has openly voiced its desire to weaken the dollar, viewing it as overvalued. Yet since midyear, both economic policy uncertainty and geopolitical risk indices have fallen, while gold prices have barely paused. This detachment from traditional safe-haven logic is raising eyebrows.

Still, according to a recent report by Bank of America’s global commodities team, the White House’s “non-traditional policy framework” remains structurally bullish for gold. Factors such as widening fiscal deficits, rising debt, efforts to reduce the current account deficit, and potential rate cuts amid 3% inflation could all support further gains.

Chief investment strategist Michael Hartnett of Bank of America added that shifts in Federal Reserve policy, government stimulus, and the potential for a “gold revaluation” (akin to 1934 and 1973) could sustain the broader currency-devaluation trade. Historically, gold prices have risen around 300% on average over 43 months during prior bull markets.

And unlike equities, gold has no universally accepted valuation metric. The metal has doubled in five years and risen more than 250% over the past decade—yet determining when it’s “overvalued” remains largely subjective.

Crowded Trades, Contradictory Signals

Because gold lacks a clear valuation model, its bullish narrative—like that of many commodities—depends heavily on supply and demand.

A key driver has been central banks’ steady accumulation of gold to diversify reserves, alongside rising inflows into gold ETFs, as more investors seek an alternative hedge to long-duration government bonds. Central bank demand appears structural and persistent, leading analysts to keep it in their long-term models—even if prices have already risen in anticipation of that buying. The real question is: where does it end?

Private investment demand, meanwhile, looks more puzzling. According to Bank of America’s monthly fund manager survey, “long gold” was cited in September as the second most crowded trade—trailing only U.S. mega-cap tech stocks. Yet more than one-third of respondents reported no gold exposure at all, and among those holding gold, the average portfolio weight was just 4.2%.

This contradiction—crowded narrative but limited positioning—complicates the market’s outlook.

Three Warning Signs

Gold’s parabolic rally is flashing three warning signals:

1. The pace of gains has become unsustainably steep.

2. Prices are decoupling from uncertainty indices.

3. The metal is diverging from real rates and the dollar.

JPMorgan notes that gold’s recent surge far exceeds what could normally be explained by a one-year decline in real interest rates. Typically, when the real yield on other “safe assets” drops, gold becomes relatively more attractive. JPMorgan attributes the current overshoot to strong physical demand and advises buying on dips during short-term corrections caused by rate volatility.

Still, both JPMorgan and HSBC caution that if markets once again price in a higher terminal Fed rate, gold could face headwinds. The previous quarter’s rally occurred as implied terminal rates fell nearly 50 basis points to below 2.9%, but recent weeks have seen rates edge back up—boosting the dollar, partly due to political developments in Japan and France.

While last Friday’s flare-up in trade tensions briefly reignited risk aversion, the broader decline in economic and geopolitical uncertainty remains intact. HSBC warns that if global military or trade tensions ease next year, gold prices could ultimately come under pressure.

Meanwhile, there are also people arguing that traditional drivers such as real rates or rate-cut expectations no longer explain the current bull run. She suggests that gold’s ascent is being powered by expectations of a “global economic and political order reshuffle.” Combined with gold’s unique low-correlation value in global portfolios, she urges investors to maintain strategic respect for the metal’s upside potential—the rally, she believes, may be far from over.

From a technical standpoint, Deutsche Bank analysts caution that gold may already have shown signs of a “trend top” between September and October, as their models indicate prices have stayed above trend levels for longer than historical norms.