Amid record-breaking increases in gold prices both globally and locally, questions are mounting among individuals and investors about the feasibility of buying at the current time, and whether the current prices reflect true value or are experiencing price inflation—or even a potential bubble. These questions are further intensified by repeated discussions about the decline of the dollar, concerns over de-dollarization, and fundamental changes in the structure of the global financial system.
The gold market is witnessing unprecedented momentum, with prices soaring by historic rates of 65% during 2025, compared to a record increase of 126% in 1979. This situation raises urgent questions about the nature of the current surge: Is it a speculative price bubble, or does it reflect a radical restructuring of the global financial system?
In an in-depth conversation with Osama Zarai, the economic expert, the infrastructure of the gold market was analyzed, alongside the geopolitical and economic factors that shape its future.
Is gold a commodity prone to collapse?
Zarai stated that when viewing gold as a commodity, it is essential to analyze the supply-demand equation. Naturally, the commodity is subject to market forces, and if supply increases or demand decreases, prices could fall. However, the current reality of the gold market reveals a completely different picture.
Osama Zarai emphasizes that 2022 marked a pivotal turning point, as the world shifted from the "old school of gold" to a "new school" redefining the yellow metal. Gold is no longer merely a decorative item or a piece of jewelry to wear; it has become a strategic commodity that has firmly entered the core reserves of central banks and major investment funds to hedge against financial and geopolitical risks.
Who is buying gold now, and why?
Zarai explained that data indicate the primary buyers of gold recently are not speculators, but central banks, investment funds, and large institutions, alongside individuals. This buying is not aimed at quick profits, but as part of asset redistribution within portfolios and as a hedge against global financial system risks.
He added that if gold is treated as a commodity, any shortage in supply or increase in demand naturally sustains upward pressure on prices. The global supply of gold is inherently limited and cannot be rapidly increased in response to market movements.
Sources of supply and their limits
Zarai pointed out that the global gold supply relies on four main sources: mining production, gold recycling, interbank lending and leasing, and central bank reserves offered for sale. On the other hand, demand is distributed across several sectors, including central banks, investment funds, jewelry, the technology sector, and paper demand through futures and options markets.
Data revealed that mining production in 2024 reached around 4,400 tons, while demand was nearly equal or slightly higher. Entering 2025, the gap between supply and demand widened noticeably, with first-quarter production at approximately 855 tons versus demand exceeding 1,200 tons, and the pattern repeated in the second quarter with production at 909 tons against demand of 1,250 tons.
Zarai confirmed that these figures indicate the market is not suffering from a price bubble as much as a structural imbalance in the supply-demand equation, adding: "What is happening today in terms of price increases is real buying, not purely speculative; it is a restructuring of the financial infrastructure for every individual, institution, and central bank."
He also noted that the gold market faces several challenges, including rising extraction costs per ounce ranging from $1,300 to $1,500, and a tripling of the costs of opening new mines over 15 years, in addition to the fact that opening a new mine requires 5 to 10 years to begin actual production. Looking at future projections, the global market is expected to face a deficit of 300 to 400 tons annually by 2027.
Why has demand surged to these levels?
Zarai believes that the rising demand for gold stems from three main factors: financial, monetary, and psychological. Geopolitical tensions, rising protectionist policies, and increased discussion about imposing tariffs have all driven individuals and countries to seek safe havens.
He added that the freezing of Russian assets in 2022 played a pivotal role in changing the world's perception of the dollar. This event was considered a dividing line between what can be called the old school of gold and the new school. Dollar politicization led to a loss of trust in it as a neutral currency, prompting countries to strengthen their gold reserves.
Gold as a financial weapon: the Russian experience
Zarai highlighted a critical concept: the "politicization of the dollar," which became evident after the freezing of Russian assets in 2022. This action prompted countries to search for genuine alternatives to cash and U.S. bonds.
He added that while the U.S. used the dollar as a weapon, Russia used gold to stabilize its currency (the ruble) at 5,000 rubles per ounce, preventing the collapse of its economy. This step demonstrated that gold remains a sovereign asset capable of playing a central monetary role during crises, encouraging other countries to follow a similar path.
Basel III and the changing status of gold
With the implementation of Basel III standards, the classification of gold within bank balance sheets changed, as it is now treated as a highly liquid financial asset equivalent to cash, whereas previously it was valued at only half its worth. This shift enhanced the attractiveness of gold to major financial institutions.
Shift of gold pricing to the East
Zarai indicated that the driving force of the gold market is gradually moving from London and New York to Shanghai. The Chinese exchange has become a key player in setting price trends, driven by rising Asian demand and China's growing role as a strategic gold buyer, both officially and unofficially.
China buys gold "secretly" in quantities far exceeding publicly reported amounts, and the closing of the Shanghai exchange has become the main driver for London prices the following day.
Gold revaluation and the role of central banks
Central banks evaluate gold in their balance sheets in three ways: market price, book value, or a hybrid method combining both. This provides countries with significant accounting flexibility, especially those holding massive reserves like the United States, which owns more than 8,133 tons of gold still priced at historically low accounting levels.
Zarai believes that gold revaluation can be used as an indirect tool to reduce debt, by weakening currency value and raising asset values, which partially occurred in the 1970s.
Gold vs. bonds: the battle of assets
Zarai stated that comparing the size of the gold market to the U.S. bond market reveals a major liquidity gap, with daily liquidity in the gold market not exceeding $150 billion, compared to trillions in the bond market.
He explained that converting just 1% of bond funds into gold could lead to unprecedented price surges, potentially pushing the ounce above $5,000.
Zarai added that the U.S. bond market is worth approximately $30 trillion, while the value of all extracted gold in the world is estimated at around $31 trillion, based on 7 billion ounces at $4,560 per ounce.
He confirmed that converting 1% of bond liquidity into gold would require about 2,166 additional tons of gold—equivalent to global mine production for a year and a half—which could push the ounce into the $5,000–$6,500 range.
Has gold detached from the dollar?
Zarai noted that the traditional inverse relationship between gold, the dollar, and interest rates no longer holds as strongly after 2022, with correlation measures dropping significantly, reflecting gold’s transformation from a gauge of dollar strength into an independent asset used to hedge against the financial system itself.
He added that in the old school, there was a clear inverse relationship (beta 0.8–0.9): if the dollar rises 1%, gold would fall by almost the same percentage. Today, this ratio has dropped to 0.35 for the dollar and 0.18 for U.S. interest rates. This indicates that gold now moves as an independent asset, as investors buy gold to hedge against the dollar itself, explaining why both can rise simultaneously.
He highlighted that amid these changes, gold remains "the real asset for all tangible things" and one of the pillars of the new financial system being formed before our eyes.
Gold in Egyptian culture
Zarai emphasizes that gold in Egypt is not merely an investment, but a cultural and social element, viewed as a primary protective shield for the family. Owning a few grams of gold provides a sense of security greater than keeping cash in banks.
He expressed concern about the shrinking share of individuals in gold holdings in favor of institutions and central banks. With rising prices, companies have started innovating solutions for small investors by offering extremely small gold bars weighing a quarter gram or half a gram, catering to limited purchasing power. These weights have become a very successful means of saving and hedging against inflation.
Zarai advised consumers to buy gold when liquidity is available, saying: "Buy gold when you have cash available, and do not speculate unless you are a professional; gold is a long-term investment that preserves its value regardless of price fluctuations."
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