The sustained rise in gold prices is primarily due to strategic, long-term buying by central banks, not short-term speculation. Goldman Sachs sees significant further upside potential, which is not yet priced in, from large private institutions like pension funds and sovereign wealth funds eventually adding gold as a strategic asset.

A new structural driver for gold is demand from emerging market central banks seeking to mitigate geopolitical risks. Events like the freezing of Russia's reserves have accelerated a trend of buying gold to reduce exposure to sanctions and to back their own currencies, creating a higher floor for prices.

Despite recent price volatility, the firm maintains a bullish outlook on gold. They believe fundamental drivers, including 800 tons of expected central bank purchasing and 580 tons of ETF inflows for the year, are strong enough to push prices to new highs, making dips an attractive entry point.

Gold's historic link to US real yields broke after the US froze Russian reserves. This forced global central banks to reassess risk and buy gold regardless of price, creating a powerful new source of demand and structurally altering the market, a change now being followed by sovereign wealth funds.

J.P. Morgan's bullish gold forecast isn't just about investor flight to safety. It's underpinned by inelastic mine supply failing to meet structurally higher demand from central banks, who can buy fewer tons at higher prices to maintain reserve targets, creating a strong floor for the market.

Gold's current volatility has only been matched twice in 30 years: during the 2008 GFC and the 2020 pandemic. This indicates the market is not merely hedging inflation but is actively pricing in a generational, systemic crisis not yet reflected in equities or credit.

JPMorgan forecasts a drop in central bank gold purchases in 2026. This isn't a bearish change in strategy, but a mechanical effect of higher prices. At over $4,000/oz, central banks can buy fewer tons to achieve their desired percentage allocation of gold reserves, indicating continued structural demand.

The strategist differentiates the precious metals rally. Gold's rise is supported by structural central bank buying and a broader investor shift to real assets. In contrast, silver's recent surge is a speculative 'overrun' that is already causing industrial demand destruction, making it vulnerable to a sharp correction.

Despite a massive single-day drop, the long-term bullish case for gold remains intact. The pullback is viewed as a normal de-risking event within a larger structural trend of diversification by central banks, leading to a "ratchet-like" price formation over time.