Experts at JPMorgan Chase & Co. believe there are logical arguments that could be made against the continuation of gold’s rise; however, these factors are still insufficient to change the metal’s long-term bullish trajectory.
Kriti Gupta, Executive Director of Private Banking, and Justin Beiman, Global Investment Strategist at the bank, said that gold has recorded exceptional performance over the past five years, rising by more than 170%, supported by unprecedented geopolitical tensions and global economic fragmentation.
They noted that concerns over currency value erosion, slowing economic growth, persistent inflationary pressures, and government fiscal imbalances have not yet been fully reflected in sovereign asset valuations, reinforcing gold’s status as a safe-haven asset during periods of uncertainty.
Gold Performance During Crises
Historically, gold has achieved an average return of 1.8% and a median return of 3% during major geopolitical shocks, outperforming most other asset classes.
Given the current geopolitical environment, which shows no near-term signs of stabilization, a fundamental question remains: what could stop gold’s ongoing rally?
Central Bank Demand as the First Risk Factor
Analysts consider the possibility of a slowdown or halt in central bank gold purchases as a primary risk.
Central banks have been the largest driver of gold’s price surge since the outbreak of the Russia–Ukraine war in 2022, as many countries sought to diversify reserves away from the U.S. dollar following the freezing of Russian assets.
The list of the largest global gold holders outside the International Monetary Fund includes the United States, Germany, Italy, France, and Russia, raising questions about the potential impact of a structural decline in demand or a shift toward selling.
The report recalled the historical case of the United Kingdom between 1999 and 2002, when it sold more than half of its gold reserves through public auctions. Switzerland also decoupled the Swiss franc from gold, leading to a 13% price decline within three months.
However, that wave of selling ended after the Washington Agreement on Gold was signed to coordinate large-scale sales and reduce market volatility, before the agreement expired in 2019 as central banks returned to being net buyers.
Although the possibility of selling or demand slowdown exists theoretically, JPMorgan analysts believe this scenario is unlikely in the near term.
The bank bases this view on the fact that gold accounts for about 19% of reserves in emerging markets compared with around 47% in advanced economies, leaving significant room for further accumulation.
China and Emerging Markets Drive Structural Demand
China remains one of the key strategic buyers of gold, continuing to increase its allocations despite being the seventh-largest gold holder globally. Gold represents only 8.6% of China’s total reserves according to the World Gold Council, leaving ample room for future purchases.
Other countries such as Poland, India, and Brazil are also expected to support long-term structural demand.
Meanwhile, there are no indications that central banks in the G10 group intend to sell gold, as such a move would require major legislative changes and a departure from more than a century of monetary stability policies.
Survey data also showed that 95% of central banks expect to increase their gold holdings globally by 2025, while only 5% expect no change, and none expect a decline.
Retail Investor Behavior as the Second Risk Factor
The second potential risk relates to retail investor behavior, which has played an increasingly important role in supporting prices.
Analysts warn that individual investors have rushed into gold as a hedge against geopolitical and economic uncertainty but could quickly exit if tensions ease or alternative hedging instruments emerge.
Late January volatility illustrated this behavior, as gold rose by nearly 20% within a week before falling by a similar magnitude over two days, movements attributed by some to short-term speculative trading.
Nevertheless, broader market analysis suggests that retail activity remains within historical normal ranges. Gold-backed exchange-traded funds hold about 100 million ounces, roughly 8% of global central bank gold holdings, below the 2020 peak of 110 million ounces, indicating that retail investors alone cannot determine long-term price direction.
Long-Term Bullish Outlook Remains
JPMorgan analysts believe gold is no longer merely a short-term hedge but a strategic portfolio diversification asset.
The metal provides inflation protection, performs better during sharp market declines, and maintains relatively low correlation with other financial assets.
The bank also expects new demand from Chinese insurance companies and the cryptocurrency community to push gold prices higher in 2026.
Natasha Kanewa, Global Head of Commodities Strategy at the bank, said that gold’s path may not be linear but is supported by long-term structural drivers, including continued official reserve diversification, U.S. dollar weakness, lower interest rates, and rising geopolitical uncertainty.
JPMorgan estimates that central bank purchases may average about 585 tons of gold per quarter during 2026, reinforcing the view that the metal’s bullish cycle has not yet reached its peak.
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