FOMO, a sliding dollar, and trade-war jitters propel bullion to fresh records as investors scramble to hedge risk

What happened:

Gold has staged its biggest rally since the 1970s, vaulting nearly 50 per cent this year to an all‑time high above $3,930 a troy ounce.

The initial spark was a flight to safety after US President Donald Trump’s trade war reignited tariff uncertainty, jolting global supply chains and sending the dollar into a tailspin.

Yet the move has taken on a life of its own.

Even as tariff‑induced volatility eased over the summer, bullion’s ascent steepened: September alone delivered a near‑12 per cent jump — the biggest monthly gain since 2011 — turbocharging a rally that has drawn in a widening circle of retail and professional investors worried about missing out.

A rally born in caution, fueled by FOMO

Gold’s classic appeal is defensive.

It performs when nerves fray and policy looks unpredictable.

But in 2025, fear of loss has been joined by fear of missing out.

Portfolio managers who trimmed equity risk during the spring’s tariff salvos found themselves lagging benchmarks as gold kept grinding higher.

Family offices that once capped bullion at 5 per cent allocations are reassessing those limits, while a new cohort of younger investors — more accustomed to momentum‑driven trades — has embraced the metal via ETFs and fractional apps.

The result is a feedback loop: each leg higher validates the thesis for newcomers and forces underweight skeptics to capitulate.

Mechanics behind the melt‑up

Behind the psychology sit plumbing and policy.

A softer dollar lowers the hurdle rate for non‑US buyers, broadening global demand.

Options markets show a pronounced skew toward upside protection on bullion, consistent with hedging and speculative call buying that amplifies directional moves.

Futures positioning indicates that fast‑money accounts added length into September’s breakout, while systematic trend‑followers — many of whom trade price only — have flipped to maximum long.

In the physical market, refinery premiums and wholesale tightness reflect brisk pull‑through from coins and small bars to 400‑ounce institutional bars.

The combination — a weaker greenback, momentum strategies, and steady physical bids — has turned gold’s traditionally staid tape into a one‑way street.

Central banks stay in the wings — but matter

Official‑sector demand rarely makes daily headlines, yet it shapes the floor under prices.

Reserve managers in commodity‑importing economies have kept adding bullion to diversify away from currency volatility and sanctions risk.

Those flows are lumpy, not linear, but they reinforce a strategic bid that investors can lean on whenever risk assets stumble.

In 2025, that anchor has mattered more than usual: with trade policy unpredictable and fiscal arithmetic stretched in several major economies, the case for neutral reserve assets has only grown stronger.

Summer lull that wasn’t

What surprised veterans wasn’t that gold rallied during tariff fireworks — it was that the rally accelerated after the immediate headlines faded.

Historically, bullion consolidates when volatility ebbs.

This time, September’s 12 per cent leap followed a plateau in equity swings and narrower credit spreads.

The difference was positioning and narrative: dip‑buyers no longer waited for a deeper pullback; instead, they chased.

With each close at a fresh high, allocators rotated from ‘tactical hedge’ to ‘core holding,’ pushing three‑ and six‑month rolling returns to levels last seen during the post‑crisis run‑up to 2011.

The message from markets: the regime has shifted.

The trade war’s long shadow

Tariffs don’t just lift consumer prices; they inject uncertainty into boardrooms.

Companies confronted with shifting rules delay capex, opt for higher inventories, and pass on costs where they can.

That caution can sap growth at the margin and, in turn, weigh on the dollar via expectations for easier policy.

For gold, the mechanism is straightforward: a softer dollar, lower real yields, and a hunger for assets with no default risk.

Even when headline frictions calm, the second‑round effects — altered supply chains, thinner margins, and re‑routed trade — linger.

2025’s rally is as much about those shadows as the headlines themselves.

Flows tell the story

Exchange‑traded funds tracking bullion have recorded steady inflows as the year progressed, with turnover spiking on breakout sessions.

In derivatives, term structure flattened as front‑month demand outpaced deferred contracts — a hallmark of momentum chases and hedging programs that prefer near‑dated protection.

Options dealers, short upside to clients, hedged dynamically into strength, adding mechanical buy pressure.

Meanwhile, mint sales reported backlogs on popular one‑ounce coins, and vault providers noted heightened inquiries for segregated storage.

All of that is anecdotal, but together it paints a coherent picture of rising conviction and shrinking patience.

Risk: what could puncture the move?

Gold’s surge has been orderly, but the same dynamics that lift prices can reverse quickly.

A decisive truce in the trade conflict, a rebound in the dollar, or a surprise rise in real yields would test the FOMO bid.

If crowded momentum strategies scramble for the exits at once, intraday ranges could widen and liquidity could thin — particularly during off‑hours.

That said, the structural buyer base looks deeper than in previous cycles, with central banks and long‑horizon investors anchoring demand.

Even a setback may translate into consolidation rather than collapse.

Portfolio math in a changing regime

For multi‑asset investors, the question isn’t whether gold ‘works’ — it has — but how to right‑size it.

Traditional 60/40 portfolios relied on bonds for ballast, but inflation variability and policy uncertainty have muddied that relationship.

A modest allocation to gold has historically reduced drawdowns in stagflationary or policy‑shock scenarios.

In 2025, the calculus includes another term: participation risk.

If the metal continues to lead during macro scares, being flat can be as career‑risky as being short.

That doesn’t argue for maximal exposure; it argues for a rules‑based framework that adds on weakness and trims into euphoria, avoiding binary bets.

Signals to watch next

Three dashboards will help investors judge durability from here.

First, real rates: sustained declines usually map to durable gold uptrends.

Second, the dollar: further weakness broadens non‑US demand and lubricates flows.

Third, positioning and implied volatility: if upside skew stays elevated while net length stabilizes, the market is maturing; if both blow out together, expect more air‑pockets.

Seasonals turn friendlier into year‑end, but this cycle has already defied several playbooks.

Flexibility beats nostalgia.

The bottom line

What began as a defensive dash has turned into a regime‑defining repricing of the world’s oldest haven.

Prices above $3,930 a troy ounce aren’t just a headline; they signal a market that is reprioritizing certainty and optionality amid policy flux.

FOMO alone can’t sustain an asset forever, but it can carry it farther than skeptics think — especially when fundamentals rhyme.

For now, the path of least resistance remains higher, punctuated by sharp shakeouts that will test conviction.

The lesson of 2025 so far: in a world learning to live with rolling shocks, gold has reclaimed center stage.