Gold Market Surge: What Investors Need to Know About the Sustainability of the Rally
Gold has surged approximately 15% this year, marking a remarkable ascent. However, Nigel Green, CEO of deVere Group, one of the largest independent financial advisory firms globally, cautions that this momentum may not be sustainable.
The precious metal recently reached $5,500, driven by escalating geopolitical tensions, soaring government debt, and growing investor concerns over the politicization of government bonds and major currencies. According to Green, “Gold’s surge reflects anxiety about fiscal policy, geopolitics, and the future of fiat currencies, but rallies driven by fear and momentum can reverse sharply.”
One critical but often overlooked risk to the gold rally is the potential for countries or central banks to sell gold reserves in response to fiscal or currency pressures. Green notes, “Gold remains one of the few unleveraged sovereign assets. For governments under political or financial strain, the temptation to liquidate reserves is real.”
The United States is central to this risk, with federal debt escalating rapidly, rising interest costs, and political gridlock hampering fiscal reforms. Recent tariff threats and a more assertive geopolitical stance have added uncertainty. Green highlights, “In Washington, deficits and political gridlock, including a potential government shutdown, make orthodox solutions difficult. In a crisis, selling gold could be framed as balance-sheet management rather than issuing more debt.”
Europe faces similar challenges. Heavily indebted nations confront fiscal limitations amid aging populations, and Germany may face pressure to utilize assets to support the euro during future sovereign crises. “Gold could become a politically palatable source of liquidity in Europe,” Green explains, emphasizing that systemic crises often override traditional monetary policies.
Emerging markets add another dimension of risk, with volatile currencies and capital flows possibly prompting gold sales to secure hard-currency liquidity. “In periods of capital flight, gold becomes a tool of last resort,” Green states, noting some emerging economies already adjust reserves dynamically when under market pressure.
China and Russia, which have amassed gold to reduce dependence on Western financial systems, also face the risk of forced asset sales due to sanctions, trade disruptions, or domestic financial strains. “No country is immune to liquidity shocks. Strategic accumulators can become sellers under extreme pressure,” Green warns.
He stresses that any official gold selling would likely provoke sharp market reactions given central banks’ influential role. “A sale by a major reserve holder would be interpreted as a statement about confidence in the monetary system, and markets react aggressively to statements,” he adds.
Besides official selling, deVere Group identifies other factors that could undermine the current rally. Gold’s rise has been fueled by strong momentum trading, with investors attracted by rising prices and media coverage. “Momentum drives flows, and flows drive prices,” Green notes, warning this dynamic can quickly reverse if sentiment shifts.
Green also cautions that gold’s short-term reputation as a guaranteed safe haven is often overstated. “Gold is a strategic asset over the long term, but it is volatile and sensitive to interest rates, liquidity conditions, and risk sentiment.”
Drawing lessons from history, he warns policymakers and investors alike. For instance, in 1999, the UK sold about half its gold holdings near market lows, and Switzerland and European central banks coordinated significant sales to bolster confidence in fiat currencies—each preceding major gold market shifts. Earlier attempts by Western governments to suppress gold prices during the Bretton Woods era also failed before the system’s collapse.
“History shows governments often misjudge gold cycles, and official selling can coincide with major market turning points,” Green observes.
Political uncertainty continues to buoy gold, especially as investors reassess exposure to US assets and major currencies. “Investors diversify when policy becomes less predictable. Gold benefits when confidence in fiscal discipline and monetary independence weakens,” he says.
Green concludes that investors should approach the current gold rally with caution. “If governments or central banks begin selling gold, the rally could falter quickly as investors reassess the narrative. Official selling would confirm fiscal or currency stress and could trigger a rapid repricing.”
He adds, “Gold can climb fast when uncertainty rises, but it can fall just as quickly when sentiment shifts or yields become more attractive. The rally reflects deep uncertainty, but uncertainty is not permanent. If policy stabilizes or reserves are mobilized, the market could see a sharp adjustment.”
In summary, despite gold’s impressive run, there are numerous legitimate reasons why the current rally might end sooner than many expect.
Special Analysis by Omanet | Navigate Oman’s Market
The sharp 15% surge in gold prices, driven by geopolitical tensions and fiscal uncertainties, signals both opportunity and caution for Oman’s investors and businesses. While gold remains a strategic hedge amidst global instability, the potential for official sector selling poses a significant risk that could trigger sudden market corrections. Smart investors should monitor geopolitical developments and central bank actions closely, balancing gold exposure with diversified assets to navigate possible volatility ahead.
