Gold: An Uptrend That Doesn't Rule Out Volatility

By Christophe Foliot, International Equities Portfolio Manager. 

After a remarkable rally, gold has been experiencing increased volatility for some time now. Rising long-term interest rates, higher bond yields, and profit-taking have weighed on the precious metal. This is not unusual after such a sharp rise. A bull market always experiences periods of consolidation, which can sometimes be abrupt. 

In our view, this recent volatility does not call into question the fundamentals underpinning gold. The most important of these is undoubtedly the state of public finances. Deficits continue to widen in many countries, and debt levels are reaching record highs. The ability of governments to sustain this debt over the long term is raising more questions. In this context, gold retains a unique advantage: it is no one’s liability and does not depend on the creditworthiness of any issuer. 

Purchases by central banks also provide significant support. For several years now, they have been increasing their gold reserves to diversify their assets and reduce their dependence on certain currencies. This trend is particularly evident in emerging markets, but more broadly reflects a shift in the role of gold within official reserves. Gold is no longer viewed solely as a safety net in times of crisis. It is gradually regaining a strategic role in the management of reserves.

China plays a unique role in this trend. Chinese demand is driven primarily by purchases by the central bank and by individuals. A third driver, however, could gain prominence: institutional investors. In 2025, the Chinese authorities authorized ten insurance companies to invest in gold as part of their asset allocation, notably through products traded on the Shanghai Gold Exchange, with a limit set at 1% of their assets¹.

The amounts involved are still modest, and it would be premature to expect a major impact in the short term. The decision is nonetheless noteworthy for its scope. It helps to further establish gold in the Chinese financial landscape and paves the way for a new category of buyers. If the program were to be expanded, institutional demand could become a regular source of sustained demand in the Chinese gold market. 

That leaves the question of long-term interest rates. Their rise is undeniably a cause for concern. Higher bond yields make fixed-income assets more attractive and increase the opportunity cost of holding gold, which generates no income. We should therefore expect interest rates to continue to fuel periods of consolidation and volatility.

However, it would be dangerous to reduce the gold market to this single variable. Government deficits, debt, purchases by central banks, and the gradual rise in Chinese institutional demand are underlying trends that do not disappear with a rise in bond yields. Gold may therefore still experience periods of decline, sometimes significant ones. We must accept this. Volatility is the price to pay for exposure to an asset whose fundamentals we believe remain solid. It should not necessarily be interpreted as a sign of a trend reversal.

We remain bullish on gold. Several fundamental factors continue to support its upward trend, even though its path is likely to be more volatile than before. Rather than trying to anticipate every market move, we believe that periods of correction can provide opportunities to gradually build up positions

¹Source: Bloomberg

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23/09/2026. This is a marketing communication. This document is issued by the Edmond de Rothschild Group. It has no contractual value, it is designed exclusively for information purposes. This medium may not be communicated to persons located in jurisdictions in which it would constitute a recommendation, an offer of products or services or a solicitation and whose communication could, as a result, contravene the applicable legal and regulatory provisions. This material has not been reviewed or approved by any regulator in any jurisdiction. The figures, comments, opinions and/or analyses contained in this document reflect the Edmond de Rothschild Group's opinion regarding market developments in the light of its expertise, economic analyses and information in its possession at the date of preparation of this document and are subject to change at any time without notice. They may no longer be accurate or relevant at the time they become available, in particular with regard to the date of preparation of this material or due to market developments. This medium is intended solely to provide general and preliminary information to the persons who consult it and cannot be used as a basis for any investment, divestment or retention decision. Under no circumstances can the Edmond de Rothschild Group be held liable for any investment, divestment or retention decision taken on the basis of such comments and analyses. The Edmond de Rothschild Group therefore recommends that each investor obtain the various regulatory descriptions of each financial product before making any investment, in order to analyse the risks associated and form their own opinion independently of the Edmond de Rothschild Group. It is recommended to obtain independent advice from specialized professionals before concluding any transaction based on the information mentioned in this material, in order to ensure in particular the adequacy of this investment to one's financial and tax situation. 
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