Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Head of Commodity Strategy
Key Points:
The rally is also linked to conditions in the sovereign bond market. Thirty-year U.S. Treasury yields hover near 5%, UK gilt yields have reached multi-decade highs, and Japanese government bond yields are at record levels. For many investors, long-dated bonds no longer serve as the default defensive allocation, opening the door for gold to capture a larger share of safe-haven demand alongside other tangible assets such as silver and platinum, both supported by constrained supply outlooks.
Meanwhile, the dollar remains pinned near three-year lows despite sporadic attempts to bounce. Policy uncertainty in Washington, a dovish skew in rate expectations, and relative strength in other major currencies have kept the greenback under pressure. For non-dollar investors, this has lowered their gold returns in local currencies, examples being XAUEUR up 20%, and XAUJPY up 27%.
Another key shift has been the return of buyers to gold-backed exchange-traded funds. After four years of net selling, ETF holdings are once again rising, reversing what had been a persistent headwind. So far in 2025, ETFs have added 326 tons of gold—almost identical to the 331 tons sold over the past two years combined. The reversal underscores a broadening of the bid beyond central banks and momentum-focused traders, adding depth to the rally.
Technical factors have also reinforced the move. Last week’s break above USD 3,450 triggered a wave of systematic and momentum-driven buying, with a feedback loop amplified by fear-of-missing-out (FOMO) flows. These flows are typically short-term in nature, leaving the price vulnerable to long-liquidation should it fall back below USD 3,450. Silver’s surge through USD 40, its highest level since 2011, has provided further confirmation, but like gold it must now consolidate these lofty gains to avoid triggering long-liquidation pressure.
With markets heavily skewed toward a bullish focus, it remains important to consider what could go wrong and trigger a setback. The list of risks is shorter than usual but still relevant. Beyond the build-up in speculative positioning that could sudden unwind if recent gains fail to hold, a hawkish surprise from the Fed—either delaying cuts or offering tougher forward guidance—could dent sentiment. A disorderly rebound in the dollar would also test conviction. Finally, with long-term yields already stretched, a sharp reversal lower could restore bonds’ safe-haven appeal at the margin.
Gold’s rally to a fresh record is being driven by more than inflation fears or rate expectations alone. It reflects a convergence of factors: governance risks in the U.S., geopolitical fragmentation, waning trust in traditional safe havens, and renewed demand from institutional buyers. With both gold and silver outperforming most asset classes in 2025, and with ETF inflows adding fresh support, the case for precious metals remains strong.
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