By: Rhona O'Connell, Head of Market Analysis
Rhona O'Connell, Head of Market Analysis, EMEA & Asia
Tel: +44 203 580 6115 / mobile +44 7384 833897
26th October 2025
Gold - New factors starting to emerge
Pro’s and con’s ahead of the LBMA Conference, which starts today
Gold price action: the old arguments about dollar drift and geopolitics have been done to death – in summary they both point to fresh investor buying into any substantial correction in prices. Official sector buying is significant not only in terms of tonnage, but more importantly in that it sends a message to the markets that some official bodies are concerned over potential financial and / or political instability.
There is no doubt that it’s been a case of “all-aboard” this particular train, which has recently been running away down the tracks. So, what happens next could depend on not only the tried and tested parameters but also on some other forces – one of which has been simmering for a while, but another which is, by the looks of it, just around the corner.
Seconds out – Round Two
In the supportive corner we have private credit institutions taking on risk from some of the banks. This has been going on for months and puts me in mind of the sub-prime developments in 2007. This does not mean that we should be expecting another GFC because – hopefully, some central bankers and monetary authorities have learned the lessons of that period. Certainly, regulation is a lot tighter than it was, but private credit seems largely to be unregulated and it may only be a matter of time before the market gets a cursory lesson. Additionally the Fed appears to be loosening the parameters for bank stress tests, which is something to watch.
In the other corner there is the possibility that the Fed will have to start replenishing reserves, which have been falling as the Quantitative Tightening programme has continued, some commentators are suggesting that at $6.6 tn they are becoming worryingly low and some short-term refinancing rates have already been rising. And in the background, as our Chief Strategist pointed out towards the end of last week, US debt-funding is now costing more than defence. If the Fed goes into neutral with respect to reserves, that may not make much difference, but a drain of capital from the markets puts upward pressure on rates.
My key point to watch: the outcome of the Lisa Cook court case (Supreme Court due to rule in January). If this goes in favour of the President, then that’s another big bull signal for gold because of the undermining of Fed independence. If Cook comes out on top then that could be a headwind.
Central banks and derivatives: tough one this one. Generally, they tend to be prudent and driven by long-term policy rather than prices, although I can see how higher rates might entice some lending – assuming there are borrowers out there. What we do know is that the official sector does not tolerate a disorderly gold market so any blow-out akin to that in silver (but that was for a different set of reasons) would almost certainly see discreet lending in order to redress the balance. We believe we saw that when the gold EFP blew out towards the end of last year because the tightness was very short-lived.
So on balance, the tailwinds are still stronger than the headwinds. Now to test the waters with over 900 LBMA Conference delegates….
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