Why Investors Are Ditching Bonds for Gold in 2025

Economic

Summary:

Gold is shining in 2025, outperforming all major assets. With political instability, doubts over Fed independence, and rising economic risks, gold’s role as a trusted, uncorrelated store of value has made it the safe haven of choice.

Gold has surged to the top of investors' wish lists in 2025. The yellow metal, long revered as a hedge against inflation and geopolitical turmoil, has seen its price rocket to record highs above $3,600 (€3,080) per ounce, delivering returns of nearly 40% year-to-date ––gold's best year since 1978.

While global equity markets have delivered positive returns this year, they remain well behind gold’s performance. In contrast, bonds are enduring yet another year of disappointing performance.

Why Investors Are Ditching Bonds for Gold in 2025_1

Why bonds no longer offer protection

US Treasuries and European sovereign bonds have long served as shock absorbers in balanced portfolios.

In times of economic weakness, bonds typically rallied as risk assets declined. It held true only as long as inflation remained subdued, but that relationship appears to be breaking down.

Since peaking in 2020, European government bonds have shed around 20% of their value, and US long-duration Treasuries have fared even worse, halving in price over the same period. Year-to-date in 2025, benchmark European bond indices are down 2%, underperforming both equities and commodities.

For investors relying on the classic 60/40 portfolio mix—60% equities, 40% bonds—the returns have been underwhelming. Over the past five years, the strategy has returned just 32%, while the S&P 500 alone returned 109%.

Worse still, the supposed diversification benefits have broken down: balanced portfolios experienced similar volatility and even deeper drawdowns compared to all-equity allocations.

When growth falters, geopolitical risks escalate, and inflation stays elevated, bonds struggle to deliver protection.

Inflation is the bond market’s greatest adversary—eroding real returns and undermining their safe haven status. In such an environment, gold steps in to fill the void.

Enter gold: a hedge against twin risks

Amid this structural bond underperformance, investors are increasingly turning to gold as a portfolio stabiliser—one capable of protecting against risks emanating from both equity and bond markets.

Gold’s value is largely uncorrelated with other asset classes. That feature has made it an ideal hedge in today’s multifaceted risk environment.

In episodes such as the post-Liberation Day selloff in April, both equities and bonds declined in unison, offering investors little refuge.

This breakdown in correlation mirrors patterns from the 1970s, when inflation ran rampant amid weak central bank credibility.

Then, as now, gold outperformed all major asset classes, driven by investor demand for protection against monetary debasement and systemic risk.

According to Goldman Sachs, equity-bond portfolios are particularly vulnerable in two scenarios: when institutional credibility erodes––as during the 1970s––and when supply shocks drive 'stagflationary' pressures––as seen in 2022). In both, gold historically shines.

Central banks lead, investors follow

Investor behaviour in 2025 is also being influenced by an aggressive wave of central bank gold buying, particularly from emerging markets.

Since Western sanctions froze Russia’s foreign currency reserves in 2022, countries such as China, India and Turkey have accelerated efforts to diversify reserves away from the US dollar, funnelling billions into gold.

According to the IMF, central bank gold purchases have risen fivefold since February 2022.

Investors are now following the wave. The SPDR Gold Shares (GLD), the world’s largest physically-backed gold ETF, has attracted $11.3 billion (€9.63bn) in inflows this year alone—on track to surpass its record from 2020.

This is a clear sign that private investors are beginning to follow the lead of central banks, rethinking gold’s role as a strategic reserve asset.

Unlike bonds, which can be inflated away or subject to sovereign default, gold does not depend on any institution’s credibility. It cannot be printed, sanctioned or debased—attributes that are proving increasingly attractive amid a world of rising debt, polarised politics and fragmented risks.

High levels of government debt and fiscal looseness further cloud the outlook for bonds. Investors increasingly view them not as safe assets, but as liabilities vulnerable to inflationary erosion.

If central banks are compelled to suppress yields to manage debt servicing costs—a process sometimes referred to as "financial repression"—then real returns on bonds could remain negative for years.

How high could gold price rise?

In 2025, this risk is not merely economic but institutional.

Investors are increasingly wary of political interference in monetary policy, particularly in the United States. Donald Trump’s aggressive campaign against Fed Chair Jerome Powell has raised alarms over potential pressure on the Federal Reserve to keep interest rates artificially low.

Should the Fed’s independence be compromised, its ability to fight inflation could be undermined—making gold an attractive hedge against institutional fragility.

Goldman Sachs analyst Samantha Dart highlighted this concern, warning that if just 1% of US private Treasury holdings rotated into gold, prices could soar to nearly $5,000 (€4,263) per ounce.

Even in a more moderate scenario, Goldman expects gold to hit $4,000 (€3,410) by mid-2026, citing political uncertainty, global central bank demand, and declining faith in US fiscal management.

The gold signal

Gold’s historic rally in 2025 reflects more than just market momentum—it marks a fundamental shift in investor priorities.

As bonds lose their defensive power and political risk undermines confidence in monetary institutions, gold has reasserted itself as the ultimate safe haven asset.

Its uncorrelated nature, resistance to inflation, and independence from institutional credibility make it uniquely suited to a world where traditional safeguards are faltering.

In portfolios once anchored by bonds, gold is now taking centre stage.

Source: Euronews

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Michelle

Economic

Forex

Yen rebounded broadly today, climbing to the top of the performance leaderboard as traders latched onto speculation that the BoJ may still raise rates as soon as October. A Bloomberg report citing unnamed officials suggested some policymakers favor an earlier move, with reduced concern about growth risks following the U.S.–Japan trade deal. The report noted that the key variable for policymakers is whether the drag from U.S. tariffs on Japan’s economy remains within expectations. If so, the bank could argue there is room to resume normalizing rates despite political turbulence in Tokyo.

However, the report relied on anonymous sources and came alongside conflicting headlines. Many analysts argue the resignation of Prime Minister Shigeru Ishiba and the ensuing LDP leadership contest are reasons for caution. The BoJ, they contend, is unlikely to risk tightening policy amid such political uncertainty. The central bank also has time on its side. Policymakers can afford to wait until early next year for the next hike, ensuring stability while avoiding the impression of acting in haste. For markets, this means rate expectations are likely to remain volatile as headlines shift.

Elsewhere, Euro weakened broadly, with investors still digesting the ouster of French Prime Minister François Bayrou on Monday. His government’s collapse has heightened perceptions of instability in Paris, though the turmoil alone is unlikely to drive sustained Euro weakness without broader contagion. Still, the picture of France cycling through four prime ministers in two years have weighed on confidence. With President Emmanuel Macron scrambling to find another candidate capable of surviving parliament, Euro has remained defensive.

In the wider FX market, Yen is the day’s strongest performer so far, followed by Aussie and Kiwi. Euro is the weakest, trailed by the Swiss Franc and Loonie. Dollar and Sterling sit mid-pack.

In Europe, at the time of writing, FTSE is up 0.26%. DAX is down -0.48%. CAC is up 0.31%. UK 10-year yield is up 0.012 at 4.62. Germany 10-year yield is up 0.029 at 2.674. Earlier in Asia, Nikkei fell -0.42%. Hong Kong HSI rose 1.19%. China Shanghai SSE fell -0.51%. Singapore Strait Times fell -0.25%. Japan 10-year JGB yield fell -0.03 to 1.565.

Westpac: Australia consumer optimism elusive, RBA to pause in September

Australia’s Westpac Consumer Sentiment Index dropped -3.1% mom to 95.4 in September, reversing part of last month’s boost from the RBA’s third rate cut. While sentiment remains modestly above July levels and well above the April tariff-driven low, the index has slipped back into “cautiously pessimistic” territory. Westpac said outright optimism remains “elusive”, with households still uneasy about the path ahead despite relief from the cost-of-living crisis.

The RBA is expected to keep its cash rate steady at 3.6% when it meets later this month. Westpac noted recent data on inflation and demand came in “somewhat firmer than expected”, reinforcing the case for caution. Policymakers are seen waiting for further confirmation that underlying trends remain benign before resuming cuts.

For now, consumer recovery looks sluggish, and Westpac expects “further easing will likely be needed” to sustain momentum. It forecasts another 25bp cut in November and two additional moves in 2026, underscoring the gradual path ahead for both sentiment and policy.

Australia NAB business survey: Confidence falls, costs ease, capacity still tight

Australia’s NAB Business Confidence index slipped from 8 to 4 in August, but conditions showed improvement, rising from 5 to 7. Trading remained steady at 12, while profitability rose from 2 to 4 and employment from 2 to 5. NAB Chief Economist Sally Auld said the results support the view that “the outlook for businesses continues to improve,” with both confidence and conditions now near long-run averages.

Capacity utilisation rose to 83.1% from 82.5%, staying two percentage points above its long-run norm. Capital expenditure intentions also improved, climbing from 8 to 10. Together, these suggest firms are still operating at high levels of resource use despite broader uncertainties.

At the same time, cost pressures eased further. Purchase cost growth slowed from 1.3% to 1.1%, its lowest since 2021, while labour costs moderated to from 1.9% 1.5% and product price growth dipped to from 0.8% 0.6%. The survey points to an environment of resilient business activity and capacity tightness, but with inflation pressures continuing to recede.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 147.05; (P) 147.82; (R1) 148.29;

EUR/JPY’s break of 146.65 support suggest that fall from 150.90 is resuming. Intraday bias is back on the downside, and break of 146.20 will target 100% projection of 150.90 to 146.20 from 149.12 at 144.42. Also, sustained trading below 55 D EMA (now at 147.15) will argue that whole rebound from 139.87 has completed with three waves up to 150.90. On the upside, however, break of 147.51 minor resistance will mix up the outlook again and turn intraday bias neutral.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Source: ACTIONFOREX

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Winkelmann

Economic

Political

Stocks

Key points:

● Amnesty: Pakistan runs vast surveillance, firewall

● Four million people monitored via phone-tapping system

● Firewall handles 2 million sessions, blocks sites

● 650,000 sites blocked, Amnesty says

Pakistan is spying on millions of its citizens using a phone-tapping system and a Chinese-built internet firewall that censors social media, in one of the most comprehensive examples of state surveillance outside China, Amnesty International said.The rights watchdog said in a report released on Tuesday that Pakistan's growing monitoring network was built using both Chinese and Western technology and powered a sweeping crackdown on dissent and free speech.Already restricted political and media freedoms in Pakistan have tightened in recent years, particularly after the military broke with then-Prime Minister Imran Khan in 2022, who was later jailed and thousands of his party activists were detained.

Pakistan's spy agencies can monitor at least 4 million mobile phones at a time through its Lawful Intercept Management System (LIMS), while a firewall known as WMS 2.0 that inspects internet traffic can block 2 million active sessions at a time, Amnesty said.The two monitoring systems function in tandem: one lets intelligence agencies tap calls and texts while the other slows or blocks websites and social media across the country, it said.The number of phones under surveillance could be higher as all four major mobile operators have been ordered to connect to LIMS, Amnesty technologist Jurre van Berge told Reuters.

"Mass surveillance creates a chilling effect in society, whereby people are deterred from exercising their rights, both online and offline," the report said.Amnesty said its findings draw on a 2024 Islamabad High Court case filed by Bushra Bibi, the wife of former premier Khan, after her private calls were leaked online.In court, Pakistan's defence ministries and intelligence agencies denied running or even having the capacity for phone tapping. But under questioning, the telecom regulator acknowledged it had already ordered phone companies to install LIMS for use by "designated agencies."Pakistan's technology, interior, and information ministries, as well as the telecom regulator, did not respond to questions from Reuters about the Amnesty report.

FOREIGN SUPPLIERS

Pakistan is currently blocking about 650,000 web links and restricting platforms such as YouTube, Facebook and X, Amnesty said.The controls have hit hardest in the insurgency-hit Balochistan province, where districts have faced years-long internet blackouts, and rights groups accuse the military of disappearances and killings of Baloch and Pashtun activists, charges it denies.Amnesty said it also reviewed licensing agreements, trade data, leaked technical files and Chinese records tying the firewall supplier to state-owned firms in Beijing.

It added that the firewall is supplied by the Chinese company Geedge Networks. The company did not respond to a request for comment.Monitoring centres for mobile calls are common globally but internet filtering for the public is rare, said Ben Wagner, Professor of Human Rights and Technology at Austrian university IT:U.Having both in Pakistan "constitutes a troubling development from a human rights perspective” and "suggests greater restrictions on freedom of expression and privacy will become more common as such tools become easier to implement," he said.

Amnesty said the firewall uses equipment from U.S.-based Niagara Networks, software from Thales DIS, a unit of France's Thales, and servers from a Chinese state IT firm. An earlier version relied on Canada’s Sandvine.Niagara told Reuters it follows U.S. export rules, does not know end users or how its products are used, and only sells tapping and aggregation gear.Amnesty said the phone tapping system was made by Germany’s Utimaco and deployed through monitoring centres run by UAE-based Datafusion.

Datafusion told Amnesty that its centres are only sold to law enforcement and that it does not make LIMS, while AppLogic Networks, the successor to Sandvine, said it has grievance mechanisms to prevent misuse.The other companies named in the report did not respond to requests for comment.

Source: TradingView

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Warren Takunda

Economic

London stocks were still firmer by midday on Tuesday, with mining names pacing the gains after Anglo American announced a merger with Canada’s Teck Resources.

The FTSE 100 was up 0.2% at 9,242.78.

French politics remained in focus after Prime Minister Francois Bayrou lost a confidence vote.

Kathleen Brooks, research director at XTB, said: "Now that the vote has been lost, the focus will shift to what will happen next. President Macron is expected to appoint a new PM in the coming days, the fifth in less than 2 years, to tackle the country’s debt problems. The issue is that President Macron is running out of candidates to be PM, which is why there is a growing call from his political rivals to call new legislative elections.

"It looks like Macron will resist such calls now, and a new PM will be elected. The market will be looking to see if a new government can make some progress on government cuts, potentially by ringfencing public holidays and adding more taxes for the wealthiest citizens. Either way, France has Europe’s widest budget deficit, and Bayrou’s successor is still left with a growing pile of debt to sort out. Bloomberg analysis shows that if France cannot make the necessary cuts, then French national debt could rise by 10% in the next 5 years to 125% of GDP."

On home shores, investors digested the latest figures from the British Retail Consortium, which showed that retail sales grew at a solid pace in August, capping off a strong summer for retailers with activity receiving a boost from warm weather and an interest-rate cut.

Total retail sales increased by 3.1% compared with last year, the BRC-KPMG retail sales monitor showed.

That followed a 2.5% annual increase in July and a 3.1% gain in June, and was comfortably ahead of the 12-month average growth rate of 2%.

Food sales were up 4.7% on last year, accelerating from the 3.9% gain in July, though this was largely down to inflation, with food prices up 4% in August. Non-food sales growth also picked up to 1.8% from 1.4%, the BRC said.

Meanwhile, in-store non-food sales were 1.3% higher, while online non-food sales gained 2.7%.

"Sunny weather and an interest rate cut helped August round off a solid summer of sales," said BRC chief executive Helen Dickinson.

"Computing performed well as parents readied children for the new academic year, and gaming continued to show strong sales. Furniture also did better for the second month in a row, following several months of falling sales. New school clothing and footwear did not sell as well as expected, as some families opted for second-hand purchases."

In equity markets, Anglo American shot higher as it said that it and Canada’s Teck Resources have agreed a merger "of equals" to form the Anglo Teck group headquartered in Canada and expected to offer investors more than 70% exposure to copper.

The news lifted the mining sector, with Glencore and Antofagasta also up sharply.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "Anglo American’s merger with Teck is its latest strategic pivot that cements copper at the heart of its portfolio. With over 70% copper exposure and a top-five global position, the combined group is positioned to ride the structural demand story tied to electrification and energy transition. The $800m in annual cost synergies and $1.4bn EBITDA uplift from Chilean asset integration are compelling. But the real prize is growth optionality, leveraging a pipeline of brownfield and greenfield projects across the Americas.

"For Anglo investors, the $4.5bn special dividend sweetens the near-term picture, while the long-term upside hinges on execution and a green light from the regulator. Back-of-the-hand maths suggests Teck holders are getting a healthy premium from the deal, and shares of the Canadian miner have soared in after-hours trading."

Elsewhere, Computacenter rose as it posted a dip in first-half pre-tax profit but struck an upbeat note on the outlook and said it expects some recovery in public sector activity in Germany.

Segro was boosted by an upgrade to ‘buy’ at Goldman Sachs.

On the downside, homeware retailer Dunelm tumbled as it said in its full-year results that it was pleased with early trading in the new financial year, but has yet to see signs of a sustained consumer recovery.

Russ Mould, investment director at AJ Bell, said: "Dunelm is holding its head above water in a tricky retail environment, yet investors clearly want more judging by the negative market response to its latest results.

"Sales and profits have moved higher, and the company is cautiously optimistic about its future. However, profit margins have shrunk slightly, net debt has nearly doubled, and the company says it hasn’t seen any signs of a sustained consumer recovery.

"Dunelm needs to keep the ship steady in this tricky environment and it’s doing a fair job. Chief executive Nick Wilkinson can be proud of the business he’s helped to grow as he bows out with this set of results."

Source: Sharecast

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Golden Gleam

Commodity

Technical Analysis

Gold rose to new record high ($3659) in early Tuesday’s trading, after strong acceleration on Monday (up 1.5%) which resulted in break and close above psychological $3600 barrier.

The latest economic data from the US showed that labor market continues to weaken (weakness further accelerated in August) that adds to strong expectations for Fed rate cut in the policy meeting next week.

Growing uncertainty over political crisis in the US and the latest negative developments in France after the government collapsed, as well as fragile political situation in the UK were the main political factors.

Worsening geopolitical situation on intensifying clashed in Ukraine and the Middle East and the latest crisis in Caribbean region (Venezuela) as well as darkening economic outlook, particularly in Europe, were also behind the latest rally into safety.

Technical pictures remain firmly bullish but overbought conditions on daily chart (although RSI and Stochastic continue to head north) warn that bulls may start losing traction.

Consolidation and shallow dips would be likely scenario, as bullish sentiment remains strong in current environment.

Broken $3600 level reverted to solid support which should ideally contain dips and confirm positioning for fresh push towards targets at $3690/$3700) Fibo projection / round-figure).

Res: 3668; 3690; 3700; 3434.Sup: 3628; 3600; 3577; 3540.

Source: ACTIONFOREX

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Glendon

Economic

Forex

The dollar hit a seven-week low on Tuesday as investors braced for U.S. data revisions that could point to a jobs market in worse shape than initially thought, shoring up the case for even deeper Federal Reserve interest rate cuts.

The dollar slumped 0.7% against the Japanese yento 146.32, its weakest level since mid-August while sterling was up 0.2% at $1.3558. The euroslipped to $1.1752 after touching its strongest level since July 24.

A Bloomberg news report that Bank of Japan officials believe it may be possible to raise the benchmark interest rate again this year also helped boost the Japanese currency.

The yen is likely to be exposed to heightened volatility due to ongoing political uncertainty and was likely helped along on Tuesday by market participants bringing forward expectations of a BoJ rate hike, said Samy Chaar, chief economist at Lombard Odier.

Against a basket of peers, the dollarslipped to a low of 97.25, its weakest since late July, ahead of the release of preliminary benchmark revisions for jobs data covering the period from April 2024 to March 2025.

Economists anticipate a downward revision of as much as 800,000 jobs, which could signal that the Fed is behind the curve in efforts to achieve maximum employment.

While the job revisions data could heighten expectations of an outsized rate cut, inflation data due later in the week could also temper those expectations, Chaar said.

U.S. producer price inflation data is due on Wednesday followed by the consumer price inflation reading on Thursday. The data points will be in focus to gauge the impact of tariffs on prices in the world's largest economy.

Traders' expectations of more aggressive Fed easing are gradually increasing. Money markets have fully priced in a 25 basis-point cut, and the odds of an outsized 50 basis-point reduction have drifted higher to nearly 12% as well, per CME's FedWatch tool.

Burgeoning expectations of policy easing by the Fed have also helped lift the spot gold price (XAU) to a record high of $3,659.10 per ounce on Tuesday.

Among other currencies, the Norwegian crownadvanced about 0.2% against both the dollar and the euroafter Norway's minority Labour Party government won a second term in power on Monday.

Political developments from Tokyo to Buenos Aires are likely to stay in focus for investors after the resignation of Japanese Prime Minister Shigeru Ishiba, the ouster of French Prime Minister Francois Bayrou and the abrupt removal of Indonesia's finance chief, all over the past few days.

"While the political uncertainty is an unfavourable development, we continue to believe that it is unlikely to be sufficient on its own to trigger a weaker euro," Lee Hardman, senior currency analyst at MUFG, said in a note.

Later this week, the European Central Bank is widely expected to keep rates unchanged at its policy meeting on Thursday.

Economists were split last month on the likelihood of further rate reductions by the ECB, but sentiment has shifted with recent data showing inflation holding close to the 2% target and unemployment at a record low.

Meanwhile, the Indonesian rupiah weakened 1% after the government replaced its finance minister on Monday. Bank Indonesia was seen buying longer-dated government bonds on Tuesday in an attempt to stabilise the market, according to two traders.

Source: Reuters

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Samantha Luan

Commodity

Forex

Technical Analysis

Economic

XAUUSD quotes maintain steady growth amid US dollar weakness and expectations of a Fed rate cut, with prices currently at 3,642.

XAUUSD forecast: key trading points

● Geopolitical tensions and trade risks increase demand for gold

● Rising XAUUSD prices are supported by US dollar weakness and record central bank purchases

● US inflation data may adjust Fed policy expectations and influence gold price dynamics

● XAUUSD forecast for 9 September 2025: 3,695

Fundamental analysis

XAUUSD prices continue to rise for the third consecutive trading session, bolstered by growing expectations of a Federal Reserve rate cut at the upcoming meeting. The revision in forecasts followed Friday’s unexpectedly weak US employment report. Based on these figures, markets have priced in the likelihood of three rate cuts this year, including the first 25-basis-point reduction as soon as next week.

Another driver is the demand for gold as a safe-haven asset. Investors have increased their interest in the precious metal amid heightened geopolitical tensions, uncertainty over tariffs, and foreign policy risks. Since the start of the year, gold has gained 38.5%, with the rally driven by US dollar weakness, record central bank purchases, and elevated global volatility.Now, market attention is focused on upcoming US macroeconomic data. The main events will be the releases of the Producer Price Index (PPI) and Consumer Price Index (CPI) later this week. These reports could significantly reshape Federal Reserve policy expectations and determine the short-term trajectory of XAUUSD prices.

XAUUSD technical analysis

XAUUSD prices are trading within an ascending channel and testing the local support zone at 3,625 near the channel’s lower boundary.Today’s XAUUSD forecast suggests the continuation of the bullish scenario, with quotes rising towards 3,695. The Stochastic Oscillator is forming a potential buy signal: its lines have turned from oversold territory and are poised to move upwards, confirming the likelihood of a bullish recovery.A confident rebound from the support zone would further confirm the bullish scenario, opening the way for a test of the upper boundary of the bullish channel.

Summary

The current XAUUSD dynamics indicate persistent bullish sentiment, with upcoming US inflation data set to be the key factor in determining the next move. The XAUUSD price forecast suggests a high probability of continued upward momentum as long as buyers hold quotes above the 3,625 support level.