Gold on pace for biggest week since 2020 as precious metal goes 'parabolic’

Gold futures recorded their largest weekly gain since 2020, surging 7% to close near $4,260 despite Friday's slight decline, driven by geopolitical tensions, expectations of Fed rate cuts, regional bank credit concerns, robust central bank buying, and a weaker dollar. This rally, which saw gold become the most crowded trade in October and ETF inflows hit record highs, has prompted major banks like BofA, Goldman Sachs, and JPMorgan to significantly raise price targets, with some forecasting $6,000 per ounce by mid-2026 or 2029.

Analysis

Gold futures (GC=F) recorded their largest weekly gain since 2020, surging 7% and contributing to a 59% year-to-date increase, despite a Friday decline of over 1% to $4,260. This rally is primarily driven by escalating US-China trade tensions, expectations of a Federal Reserve rate cut, and credit concerns from regional banks. Additionally, robust central bank buying and a weaker dollar have made bullion more attractive.

Investor sentiment is strongly bullish, with gold-backed ETF inflows reaching record highs last quarter. The BofA Fund Managers survey identified gold as the No. 1 most crowded trade in October, surpassing "long Magnificent Seven" stocks. However, a significant portion of fund managers (39%) still hold a 0% allocation, indicating potential for further institutional entry.

Major financial institutions are increasingly optimistic, with BofA reiterating a "long gold" recommendation and forecasting a $6,000 per ounce peak by mid-2026. Goldman Sachs raised its target to $4,900 by the end of next year, while JPMorgan projects $6,000 by 2029. This widespread analyst upgrade reflects conviction in gold's sustained upward trajectory, though some analysts caution about potential speculative excess.

Key Decisions for Investors

• Investors should evaluate current gold exposure given the strong bullish momentum and significantly raised price targets from major institutions.
• Monitor macroeconomic indicators such as Federal Reserve rate cut expectations and geopolitical developments, which are key drivers for gold's performance.
• Be mindful of the "most crowded trade" status and the speculative tone, which could indicate increased volatility or potential for short-term corrections.
• Consider the implications of institutional under-allocation by a large segment of fund managers, suggesting potential for future inflows.