The Compound
What Could Derail Gold?
10/17/2025, 9:06:18 PM
Economic Summary
- Gold has risen about 60% year-to-date, with especially rapid appreciation over the past 3–6 weeks, surprising many market participants and signaling strong momentum.
- Central banks are consistently buying gold and adding it to their balance sheets, creating sustained demand and reducing available market supply which supports higher prices.
- Basel III changes that took effect in July 2025 officially classify gold as a Tier 1 asset for central bank reserves, increasing its attractiveness as a reserve holding.
- Narratives of de-dollarization and a claim that China has understated its gold reserves by roughly 20% suggest additional, likely covert accumulation that could further tighten supply and push prices higher; some analysts project gold could reach 5,000.
Bullish
- Relentless central bank buying is removing supply and supporting higher gold prices.
- Basel III reclassification (effective July 2025) makes gold a Tier 1 reserve asset, boosting demand.
- De-dollarization narrative and reports China understated reserves by ~20%, implying covert accumulation.
- Gold is up ~60% year-to-date with rapid recent momentum, indicating strong market conviction.
Bearish
- Massive selling by central banks would be required to halt the rally.
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