Gold has staged a ferocious rally over the past five years, soaring more than 170% as geopolitical volatility and a historic central bank buying spree have reshaped the landscape for the precious metal. While bearish voices occasionally emerge, the senior brain trust at J.P. Morgan argues that the case against gold, though seemingly reasonable, is fundamentally flawed.
The primary argument put forth by gold bears is the risk that central banks could halt their buying spree—or even become sellers. Since Russia’s invasion of Ukraine in 2022, global central banks have doubled their net gold purchases as part of a broader effort to diversify reserves away from the U.S. dollar. History offers a cautionary tale: between 1999 and 2002, the U.K. sold more than half of its gold reserves through a series of public auctions, triggering a 13% decline in gold prices—a move equivalent to a roughly $650 drop in today’s terms.
However, according to Kriti Gupta, Executive Director at J.P. Morgan Private Bank, and Global Investment Strategist Justin Biemann, today’s landscape bears little resemblance to that era.
A second perceived risk is that retail investors, who have flocked to gold as a hedge against macro uncertainty, could exit as quickly as they entered. Late January offered a vivid example of this volatility, with gold surging 20% in a week only to crash by a similar margin over two days.
But Gupta and Biemann put this retail activity into perspective. ETF gold holdings—a solid proxy for retail interest—stand at roughly 100 million ounces, equivalent to only about 8% of global central bank holdings. That remains below the record 110 million ounces seen in 2020. While retail flows can amplify short-term moves, they are not in a position to dictate long-term price trends.
More importantly, gold’s fundamental role as a long-term diversifier hasn’t changed. It offers inflation protection, tends to outperform during market drawdowns, and reduces overall portfolio volatility due to its relatively low correlation with other assets.
Looking ahead, J.P. Morgan sees multiple catalysts that could push gold prices even higher. Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan, notes that while the rally won’t be linear, the trends driving this structural repricing are far from exhausted.
Emerging sources of demand—including Chinese insurance giants and the crypto community—are expected to enter the market, adding fresh momentum. Meanwhile, a weaker U.S. dollar, lower interest rates, and persistent economic and geopolitical uncertainty continue to provide traditional tailwinds. J.P. Morgan Global Research projects central bank demand will remain robust, averaging 585 tonnes per quarter in 2026.
The bottom line? Whether viewed through the lens of strategic central bank accumulation or long-term investor positioning, the structural support for gold remains firmly intact. Those bearish arguments, however reasonable they may appear, simply don’t hold up.
