Central banks supporting gold price

Gold’s price gains through 2025 and into early 2026 have been driven by several factors. One of the most impactful has been ongoing purchases by central banks around the globe.

According to the World Gold Council’s latest gold demand trends report, central banks bought a total of 863 metric tons of the precious metal last year. While the amount falls short of the more than 1,000 metric tons purchased in each of the past three years, it remains well above historical averages.

Both the World Gold Council and the VRIC panelists believe that central bank buying of gold will remain elevated in 2026, providing critical support for the yellow metal’s price.

Behind these movements is a desire to diversify foreign reserves away from US-dollar-denominated assets such as treasuries. Once considered a stable and reliable investment for central banks, high deficit spending and trillions in debt have dulled the luster of these instruments over the past two decades.

Adding to a deterioration in confidence are US actions following Russia’s invasion of Ukraine in 2022.

“Since 2014, central banks have been net selling US treasuries and net stacking gold, which became exponential when the US dollar was weaponized against Russia,’ Piepenburg said.

‘Weaponizing a neutral reserve asset was a big no-no in terms of respect, trust and admiration for an already overly issued and indebted US treasury, and by proxy, US dollar,’ he added.

However, Piepenburg was clear that he doesn’t see this accumulation of gold by central banks as a move away from the US dollar, but more as a means to prepare for a repricing of the dollar.

He also believes there will be greater usage of gold as a net settlement asset.

For his part, Garofalo said that the US debt-to-GDP ratio over the past 50 years has climbed to 350 percent, up from 100 percent in the 1970s. It has created a tricky situation for the US Federal Reserve, which must walk a fine line between how high it can raise interest rates without triggering a significant currency reset. Overall, US debt of over US$34 trillion, combined with trillions in annual deficit spending, is eroding central banks’ confidence in holding US debt.

Garofalo went on to explain that gold isn’t a commodity; its value isn’t driven by supply and demand fundamentals.

“It’s a monetary instrument, and monetary instruments stay relative to each other based on relative interest rates. So it’s that lack of confidence that’s really driving capital out of sovereign debt into central banks by Tether, by individuals, into gold as a monetary instrument,” he said.

Stablecoin issuers pursue gold

The panelists also pointed to interest in gold from stablecoin issuers.

For example, Tether now holds 16 metric tons of gold in reserves, worth over US$2.5 billion.

“Issuers of these stablecoins give citizens their electronic dollar, the issuers then take that dollar to buy US treasuries — good for Uncle Sam — they then arbitrage the yield on those treasuries for themselves and take a profit. The key thing to look at with Circle Internet Group (NYSE:CRCL), Tether or JPMorgan Chase (NYSE:JPM) is that they’re taking the profits from the stablecoin and they’re buying gold. That’s the great irony,” Piepenburg said.

He explained that stablecoins were introduced to support the US dollar, but creators have since added new products backed by gold, which is fundamentally more stable than fiat currencies.

Overall, Piepenburg and Garofalo agreed that the crypto market’s entry into gold is a positive sign and will catalyze consolidation in the sector’s business side, while also making it more accessible to investors.

“Having another player, another pool of capital that traditionally has not been in the space, is part of the same phenomenon that’s driving generalists for the first time in many decades back into our sector,” said Garofalo.

Gold’s long-term drivers intact

The panel made several key points that should be important to investors.

With gold’s historic run, some investors are worried that they missed the boat and now it’s too expensive.

Cambone asked Garofalo about this issue, noting that investors need to learn to focus more on gold’s role as a stable store of value and recognize the erosion of fiat currencies.

“Every fiat currency ever created has ultimately failed, and the US dollar will too. It’s like that saying about bankruptcy, it happens gradually and then suddenly,’ Garofalo said.

‘That’s what’s going to happen with the US dollar — that erosion of trust will be settled.’

Although the panelists agreed that the gold bull market will end at some point, none believe that will happen soon. They noted that the drivers of the current market show no signs of abating.

US foreign and trade policy has emphasized traditional western trade alliances and has pushed Russia, China and the rest of the BRICS nations to distance themselves from the US dollar.

This is in addition to a looming debt crisis in several major economies, especially in the US.

Is it time for gold juniors to shine?

It’s not to say that the group was advocating jumping directly on the bandwagon — they also agreed that investors could expect a significant pullback in gold, an event that occurred just days after VRIC ended.

However, they stressed the importance and safety of holding gold-linked assets during the current cycle.

This could be in the form of physical gold or exchange-traded products. They also noted that, due to gold’s price run, the junior exploration sector has seen a resurgence.

Garofalo said juniors have spent years severely undercapitalized. “Gold reserves in the ground have declined 40 percent since 2012,” he said, adding, “We can’t turn on supply to meet the increased gold price. All we can do is mine lower-grade material that otherwise would have been wasted on a lower gold price environment.”

His sentiment was echoed by Still, who sees a wave of mergers and acquisitions coming as industry majors look to fill pipelines. “If you’re a major producer, you’re trying to find gold; it might take you five or 10 years to find it. You’re going to spend millions to do so. Or do you go buy it from a junior explorer or developer?” he said.

Still explained that on a per-ounce basis, the cost to buy a company that’s put in the exploration and development work is likely cheaper than conducting the exploration themselves.

Gold price forecasts for 2026 and beyond

With various options available to investors seeking exposure to gold, the discussion turned to price forecasts.

Garofalo was blunt when he stated US$7,000, while Piepenburg was slightly more nuanced.

“I think we’re only halfway through an eight year cycle in gold, so you could see US$7,000, US$8,000, but that’s notwithstanding the unforeseeable legislative or other black swans,’ he said.

‘Based on fundamentals, gold’s direction, secular, is north,” he said.