The stock market is still rallying to record highs, the Fed is widely expected to cut rates at its meeting later this month, and the general consensus is that recession risks have all but faded.

But despite the sentiment that all is well in the economy, investors are flocking to the safe haven asset of gold—usually a sign that traders are battening down the hatches.

At the time of writing, gold sits a breath away from $3,870—yet another record high for the asset. It is not unusual for gold to climb day after day—that’s why it earned the reputation of a stable asset—but its gains in 2025 alone have been staggering. Its increase—up more than 45% over the past year—has outperformed the S&P 500, perhaps suggesting investors are valuing the security of gold more than the riskier equity markets.

That said, the frenzy around gold has spilled into the stock market, evidenced by this week’s Zijin Gold IPO which raised nearly 25 billion Hong Kong dollars (approximately $3.2 billion)—the world’s second-largest trading debut of the year. The Chinese mining giant’s mega-IPO was aided by increased demand for its end product, analysts suggested.

Goldman Sachs described gold as its “favorite long commodity” in a note to clients yesterday. Economists Daan Struyven, Lina Thomas, and Alexandra Paulus justified the call by saying they see additional price upsides driven by higher central bank demand, and attractive hedging opportunities in unattractive economic scenarios such as a global growth slowdown.

As such, Goldman is now pricing in a rise to $4,000 per troy ounce by mid-2026, and $4,300 by December 2026—pointing out that even minor shifts out of other asset classes can have a major impact on the price of precious metals.

Private investors are “diversifying significantly” into gold. The Goldman trio explained September’s gold ETF holdings totaled 109 tonnes, well beyond their prediction of 17 tonnes despite lower U.S. interest rates being seemingly priced in. Because the market remains relatively small (gold ETF holdings are equivalent to around 1.5% of privately-owned U.S. Treasuries), “a relatively small diversification step out of … fixed income may drive the next potential large gold price increase,” they said.

Central bank purchasing is also widely expected to increase over the next 12 months. The World Gold Council’s Central Bank Gold Reserves Survey released this summer (which 73 central banks contributed to) reported 95% of respondents expect central bank reserves to increase over the next year, with 43% anticipating a rise in their own holding. No central banks said they intended to decrease their reserves.

Wouter Hueskes, senior portfolio manager of commodities at pension experts APG, wrote at the time that geopolitical and economic uncertainty played a factor in this, but added another reason is de-dollarization: “Many countries, including China and Russia, aim to reduce their dependence on the U.S dollar. Gold is seen as a politically neutral reserve over which no central bank has control. Moreover, gold is a hedge against default because you are not dependent on a counterparty.”

He added: “Another important reason that has come to the fore is that gold offers a country immunity from sanctions. As we have seen with Russia, currency reserves can be frozen. This is not possible with gold … provided that a central bank has stored it in its own country.

“Diversification is another reason why central banks want gold as part of their reserves. This includes multiple currencies, as well as gold, because it has a low correlation with other financial assets.”

A useful hedge

This morning UBS Global Wealth Management’s chief investment officer, Mark Haefele, wrote that while “staying invested has paid off” volatility is likely to be coming up ahead.

“Markets are entering the fourth quarter of 2025 with uncertainty … Market volatility may be expected in the coming days and weeks, but the macroeconomic effects of shutdowns have historically been minimal and quickly reversed,” he outlined.

But despite the reassurance that losses will likely be undone, he still urged clients to look to gold: “Gold’s strong rally this year demonstrates its role as an effective portfolio hedge and diversifier amid political, economic, and geopolitical uncertainty. With low correlation to equities and bonds, as well as strong demand from investors and central banks, we view a mid-single-digit portfolio allocation to bullion as optimal.”

“Exposure to alternatives like hedge funds and private markets could also enhance portfolio resilience, in our view, as they can improve diversification while offering growth potential and downside protection.”

Here’s snapshot of the markets ahead of the opening bell in New York this morning:

S&P 500 futures were up 0.16% this morning. The index closed up 0.34% in its last session. STOXX Europe 600 was up 0.77% in early trading. The U.K.’s FTSE 100 was up 0.11% in early trading. Japan’s Nikkei 225 was up 0.87%. China’s CSI 300 was up 0.45%. The South Korea KOSPI was up 2.7%. India’s Nifty 50 was up 0.92% before the end of the session. Bitcoin rose to $118.6K.