Gold's record run still has room to climb, says State Street's top gold strategist

Gold’s meteoric rise to a record $3,800 per ounce last week is not a short-term anomaly, with multiple structural tailwinds that could sustain the rally well into 2026.

That’s according to Aakash Doshi, global head of gold strategy at State Street Investment Management, who has been sharing his insights with InvestmentNews and cites three main reasons why the rally will continue through the end of the year.

“First, inflation remains persistent despite the Fed lowering interest rates, and lower rates make gold a more attractive commodity. Second, the world is entrenched in elevated geopolitical conflict, trade tensions, and economic fragility, building a strong demand for gold. And third, governments and central banks are ratcheting up their gold reserves, shying away from the declining US dollar,” he says.

Doshi pointed to a confluence of factors that are fueling the latest surge for the precious metal:

1. Weaker US dollar on the back of trade war, reduced US growth exceptionalism, and lower real yields
2. The return of gold ETF investor inflows - 2025 is the strongest year since 2020
3. Increased concerns about US stagflation/economic risk
4. Ongoing physical demand from central banks and China retail.

Inflationary pressures and shifting monetary policy are central to the story.

“Inflation reduces purchasing power of the US dollar and is a general rise in price of goods and services where gold has traditionally been a hedge,” Doshi says. “Gold pays no coupon and is a non-yielding asset, so lower nominal and real yields benefit gold by reducing the opportunity cost.”

He says that one of the most striking trends is the shift by central banks.

“Central banks went from being net sellers of gold, on average, for four decades into the Global Financial Crisis of 2008/09 to becoming structural net buyers since 2010,” says Doshi. “2025 will be the 16th consecutive year of net central bank gold buying and 2026 will likely be the 17th.”

He sees this not only as diversification but as a hedge against the dollar.

“Official sector gold purchases have increased following the 2020/2021 pandemic shock to record levels. This is part of reserve diversification trends for CBs but also holding gold as a bearer asset (no credit risk), and US dollar hedge as the dollar share of reserves slowly declines. This may be exacerbated by trade wars and US retrenchment.”

Reset higher

As to whether investors should view the rally as fleeting, Doshi says that the gold market has likely reset higher with $3,000 becoming the new $2,000 earlier in 2025.

“Right now, $3,500 seems to be decent support and the market is likely to target $4,000/oz this winter,” he suggests. “The aggressiveness of the recent move higher likely warrants some caution, but a 5–10% pullback will likely be bought with record cash on the sidelines.”

Gold is historically less correlated to stocks and bonds and negatively correlated to the US dollar, data over the past 40 years show that gold also tends to realize lower volatility versus equities.

However, Doshi acknowledges the potential for short-term corrections.

“Yes there is always risk for a pullback, especially as gold has been a top performing US dollar denominated macro asset class for the past two years. However, I do think a sell-off will be short lived and shallow without a structural bearish catalyst,” he says.

Comparisons with other traditional hedges favor gold, according to Doshi.

“Stock/bond correlations spiked to multi-decade highs in 2022, enhancing the case for gold in portfolios. While US stock/bond correlations have eased in 2H 2025, they are still historically high. Gold benefits from its diversification attributes in that environment,” he says.

Investors looking for signals should keep an eye on US macro data.

“Right now, US jobs data and inflation data are key, to the extent stagflation risk is rising in the US economy,” Doshi says. “Asset market volatility is also very low across markets. Any sustained vol spike should benefit gold.”

Finally, on how to invest in gold today, Doshi points to ETFs.

“Physically-backed gold ETFs, including the leading SPDR funds (GLD, GLDM), are a very cost-efficient way to get physical gold exposure to a financial screen. These instruments tend to be liquid, transparent, and easy to trade.”