Gold prices surged 44 percent in 2025 to reach $4,550 per ounce in December, then climbed further to an all-time high of $5,595 in late January 2026, according to a new report from Metals Focus. The rally, the metal's strongest since 1980, recorded 56 fresh record highs before the nomination of Kevin Warsh as Federal Reserve chair in March triggered a sharp reversal. Professional investor demand then weakened amid disappointment over gold's performance during the Iran conflict.
The report, published by London-based consultancy Metals Focus, details a year of extraordinary gains driven by retail investors seeking shelter from global instability. Central bank purchases remained elevated, though roughly one fifth lower than the prior three years. They were still significantly higher than historical norms.
Poland led the charge. The National Bank of Poland purchased 102 tonnes of gold in 2025. China and Brazil were also among the most active buyers.
The pivot away from dollar-denominated reserves continued, buoying prices even as the pace slowed from the frantic buying of 2022 and 2023. Global gold mining production increased by two percent year on year to a record 3,817 tonnes. New mines and project expansions drove the growth.
Africa, Canada, and South America concentrated the gains. North America and Asia saw production decline. Low grade ores and operational disruption were the culprits there.
Recycling barely responded to the price surge. It inched up 2.8 percent to 1,404 tonnes. That marked the highest level since 2012.
Consumers in key markets restrained selling. They opted to retain the metal as a safe haven. The math does not add up.
When prices hit record after record, recycling should have spiked. It did not. That signals deep-seated anxiety about what comes next.
Jewellery demand suffered. Surging prices pushed consumers toward lower-carat products. Some abandoned gold entirely, switching to platinum.
Investors there redirected capital into exchange-traded funds and bars. Physical investment jumped 16 percent on the year, reaching 1,400 tonnes. That is the highest level in 12 years.
East and South Asia saw the strongest gains. Indian retail investment climbed 17 percent. Analysts pinned the interest to struggling equity markets in Asia.
Investors sought returns that stocks could not deliver. Industrial demand remained flat. Gains from exposure to the artificial intelligence boom were offset by weakness in consumer electronics.
Soaring prices squeezed manufacturing budgets. Consumer spending power eroded. The rally continued into early 2026.
Prices hit $5,595 in late January. Retail investors who had yet to gain exposure to the asset kept buying. Then came March.
Kevin Warsh's nomination as Fed chair changed the calculus. His hawkish outlook eased concerns over Federal Reserve independence. The gold price tumbled.
Professional investor appetite also subdued amid the Iran war. Many were, according to Metals Focus, "disappointed by gold's performance during a time of crisis" given its traditional status as a haven. Here is what they are not telling you.
Gold's failure to rally during an actual shooting war in the Middle East raises fundamental questions about what drives the metal's price. If a conflict involving a major oil producer cannot sustain a gold rally, then the narrative that geopolitical chaos automatically benefits bullion needs revision. Metals Focus reaffirmed its optimism for the second half of the financial year.
The consultancy expects Iran and the United States will reach a ceasefire. That assumption underpins their outlook. If it proves wrong, the price trajectory could shift dramatically.
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The report also highlighted a divergence between retail and professional investors. Retail buyers, particularly in Asia, continued accumulating. Professional money managers pulled back.
They questioned gold's utility when it failed to spike during the Iran crisis. That split matters. Retail demand can sustain prices for months.
But institutional flows move markets. Central bank buying, while lower than the extraordinary levels of 2022 and 2023, provided a structural floor under prices. The 102 tonnes purchased by Poland represented a strategic decision to diversify reserves away from the dollar.
China and Brazil made similar calculations. These are not speculative trades. They are long-term reserve management decisions that will not reverse quickly.
Production trends point to future supply constraints. The two percent increase to 3,817 tonnes masked regional weaknesses. North American output fell.
Asian production declined. The low grade ores being mined today require more energy and capital to process. New mines take years to bring online.
The pipeline of projects is thinner than industry analysts acknowledge. Recycling's muted response to record prices suggests that above-ground stocks are held tightly. In previous cycles, high prices triggered a flood of scrap gold.
Not this time. Consumers in China, India, and the Middle East held onto jewellery and bars. They treated gold as wealth preservation, not a trading asset.
A 28 percent drop is not a shift in fashion preference. It is a signal of consumer distress. When households choose ETFs over physical jewellery, they are prioritizing investment over adornment.
That behavior typically emerges during economic downturns. Equity markets across Asia struggled. Gold offered an alternative.
The cultural affinity for gold in India amplifies this trend. But the scale of the shift suggests something deeper than tradition. It suggests a loss of faith in paper assets.
Industrial demand flatlining despite the AI boom exposes a weakness in the gold market narrative. AI requires significant computing infrastructure. That infrastructure uses gold in connectors and circuit boards.
But consumer electronics, a much larger source of demand, contracted. Manufacturers could not pass on higher gold costs to consumers already stretched by inflation. A hawkish Fed chair reduces the likelihood of rate cuts.
Higher rates make gold less attractive relative to yield-bearing assets. The market repriced that risk violently in March. Why It Matters:
The gold market is signaling anxiety about the global financial system that official economic data does not capture. When Polish, Chinese, and Brazilian central banks accumulate tonnes of gold, they are hedging against dollar-denominated assets. When Indian households increase gold investment by 17 percent while equity markets struggle, they are voting with their savings.
The Iran war's failure to boost gold prices reveals that even traditional havens have limits. A Warsh-led Fed that maintains high rates could keep gold prices suppressed through 2026, punishing late-arriving retail investors who bought near the January peak. Key Takeaways: - Gold hit $5,595 in January 2026 before the Warsh Fed nomination triggered a selloff, exposing the metal's vulnerability to interest rate expectations. - Central bank buying from Poland, China, and Brazil provided a structural price floor, but professional investors retreated amid disappointment over gold's Iran war performance. - Metals Focus expects a US-Iran ceasefire to revive prices in the second half of 2026, a forecast that hinges entirely on a diplomatic breakthrough.
What comes next hinges on two variables. The first is the Iran ceasefire timeline. If negotiations stall, professional investor skepticism about gold will deepen.
The second is Warsh's first Federal Open Market Committee meeting as chair. His voting record and public statements will signal whether the March selloff was an overreaction or the start of a sustained repricing. Retail investors who bought near $5,595 face paper losses.
Their willingness to hold through volatility will determine whether gold finds a floor or tests lower levels. Metals Focus placed its bet on diplomacy. Follow the leverage, not the rhetoric.
The real signal is not in the consultancy's forecast. It is in the central bank vaults filling with gold bars that no one is selling.
Key Takeaways
— Gold hit $5,595 in January 2026 before the Warsh Fed nomination triggered a selloff, exposing the metal's vulnerability to interest rate expectations.
— Central bank buying from Poland, China, and Brazil provided a structural price floor, but professional investors retreated amid disappointment over gold's Iran war performance.
— Chinese jewellery demand collapsed 28 percent while Indian retail investment surged 17 percent, revealing a global divergence in how different populations use gold.
— Metals Focus expects a US-Iran ceasefire to revive prices in the second half of 2026, a forecast that hinges entirely on a diplomatic breakthrough.
Source: City A.M.
