The rally is paused, not completed
Gold’s record-setting run has misplaced momentum after its January peak. Kim describes what adopted as an “elongated pause” fairly than a reversal of the bull market. Two developments have sophisticated the outlook on the identical time. The primary is uncertainty over Federal Reserve coverage beneath new chair Kevin Warsh. Buyers are attempting to know his strategy to inflation and rates of interest, notably towards the backdrop of President Donald Trump’s views on financial coverage.
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The second is the US-Iran battle and its impact on international vitality markets. The disruption has not been confined to grease. It has affected agriculture and metals markets whereas additionally disrupting the circulate of reserves by way of energy-exporting economies.
Kim argues that a few of these reserves would ordinarily discover their means into valuable metals. That course of has been disturbed by the battle.
The market has already mirrored a few of that uncertainty. Gold fell greater than 2% on September 1 as Treasury yields and the greenback rose, with spot gold down 2.4% at $4,342.20 an oz in afternoon buying and selling. Robust US jobs knowledge on September 4 pushed gold decrease once more as markets raised their expectations of a September Fed price hike.
Kim says positioning has fallen sharply throughout a lot of his consumer franchise. The vital exception is central-bank shopping for. “The one circulate that does stay,” he stated, “is the central financial institution accumulation.” His bigger view is that the bull development will finally resume and gold will attain new highs.
Excessive charges might not all the time harm gold
Gold usually faces competitors when rates of interest rise as a result of bullion produces no revenue. Buyers can as an alternative earn a yield by holding authorities bonds. Kim accepts that relationship within the quick time period. Day-to-day actions in gold nonetheless reply to actual rates of interest, that are broadly the risk-free price adjusted for inflation expectations.
However he believes the longer-term relationship is being referred to as into query. The difficulty is what occurs if bond yields rise as a result of buyers are more and more frightened about authorities funds. In that scenario, greater yields might really coincide with better demand for gold.
Kim describes the broader development as a “cheapening of fiat forex versus gold” and says fiscal sustainability might grow to be an more and more vital cause for buyers to allocate cash to the steel. “Greater backend bond yields due to issues concerning the fiscal scenario might result in allocations going into gold,” he stated. That is notably related as a result of fiscal issues usually are not restricted to america. Kim additionally factors to Japan.
He doesn’t argue that the normal relationship between charges and gold has disappeared. Domestically, he says, he nonetheless expects the correlation to carry. His level is that its longer-term trajectory is changing into much less sure.
He additionally factors to latest official interventions in forex and bond markets. Particularly, he mentions intervention involving dollar-yen and the US Treasury shopping for bigger quantities on the lengthy finish of the Treasury curve. In his view, such interventions can encourage buyers to purchase gold. “I feel any time you see official coverage intervention, folks have a tendency to purchase gold,” Kim stated.
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The central-bank shopping for that modified the market
The strongest a part of Kim’s bullish argument is the change in central-bank demand. He identifies 2022 as an vital turning level. The Russia-Ukraine battle and the freezing of Russian central-bank reserves coincided with what he describes as a sustained improve in physical-gold accumulation by emerging-market central banks.
The numbers illustrate the change. International mines produce roughly 3,500 tonnes of gold a 12 months, in keeping with Kim. Earlier than the Russia-Ukraine struggle, central banks purchased round 400 to 500 tonnes yearly. They’re now shopping for nearer to 1,000 to 1,100 tonnes.
World Gold Council knowledge broadly confirms the dimensions of the shift. Central banks purchased 863 tonnes in 2025, effectively above their 2010-21 common of 473 tonnes. Within the first half of 2026, estimated web central-bank demand reached 345 tonnes.
The consequence is vital for the remainder of the market. A a lot bigger share of annual gold manufacturing is being absorbed by central banks, leaving a smaller amount accessible for jewelry, ETFs, bars and bodily funding. As Kim places it, “the quantity of gold remaining for all different functions” has grow to be a a lot smaller funnel. Which means the market might not want an enormous quantity of recent funding cash to push costs materially greater. “And so you do not want as a lot funding capital to drive costs materially greater,” he stated.
Asia has briefly misplaced a few of its shopping for energy
There’s, nonetheless, a major counterweight to the central-bank story. Kim says demand was sturdy on the finish of final 12 months and into 2026. Chinese language retail patrons have been energetic, Indian bodily demand was sturdy and central banks have been shopping for. The Iran battle disrupted a number of of these flows.
The issue is partly the impact of upper vitality prices on nations that import giant portions of vitality. Reserves which may in any other case have been accessible for gold purchases can as an alternative be wanted to pay for vitality or assist currencies.
Kim says some rising economies have to defend their currencies to keep up vitality safety. “India being a main instance, the place they should defend forex with a purpose to acquire vitality safety and, , accumulating gold shouldn’t be possibly prime of thoughts for them proper now. And we have seen some insurance policies in India which are making an attempt to limit the quantity of home demand to maintain management of the forex there. So, , I feel it is definitely challenged the demand facet of the equation in Asia, and you’d in all probability have to see a longer-term normalization of vitality markets and the battle in Hormuz for that circulate to return within the magnitude that it did.”
This helps clarify why he sees the present weak point as a pause fairly than a change within the longer-term cycle. A restoration in Asian demand would in all probability require a longer-term normalisation in vitality markets and across the Strait of Hormuz. Kim says that will be wanted for these flows to return to their earlier magnitude.
Gold versus silver
Kim is significantly extra cautious about silver. The silver market is way smaller than the gold market, and round half of its demand comes from business. Funding demand, nonetheless, can have an outsized impact on the value. Kim says silver might clear at $50, $80 and even $100 an oz, relying on what occurs with retail, bodily and funding demand.
He factors to January for example of what occurs when a number of sources of demand arrive on the identical time. Robust Indian bodily demand, Chinese language retail shopping for and Western ETF demand mixed to provide a pointy transfer.
However quickly rising costs accompanied by accelerating volatility can point out an unstable market. Silver subsequently skilled very giant declines, together with 20% and 30% down days. Kim’s view is that silver provides a higher-beta consequence if gold rises and retail buyers return to the precious-metals commerce.
However he prefers gold as a result of establishments are deployed there and central banks are shopping for it. Silver, in contrast, requires buyers to make an even bigger guess on retail demand. “The elemental commerce nonetheless stays gold,” Kim stated.
Why the $4,000 ground for gold issues
Kim’s bullish view finally comes with a selected stage. “We’re nonetheless bullish gold,” he stated. However he expects volatility across the financial knowledge and the Federal Reserve assembly. His most popular accumulation space is round $4,000 an oz. “When it comes to a stage that we like, 4,000 is a reasonably strong ground,” Kim stated.
He says he sees sovereign shopping for and institutional sponsorship round that stage. His desire is due to this fact to construct a place steadily if gold approaches $4,000 fairly than try and time the precise backside. “I feel in the event you get an opportunity to scale in between now and the FOMC with a number of the volatility across the knowledge, nearer to 4K, you wish to scale into an extended place there,” he stated.
The fast market check is inflation knowledge, notably CPI. Kim needs to see not solely what the inflation quantity reveals however how buyers interpret it by way of the Fed’s seemingly response.
A powerful inflation studying might reinforce expectations of tighter financial coverage and weigh on gold. A softer studying might have the other impact. However the important thing uncertainty, in Kim’s view, is the market’s understanding of the Fed’s “response perform”.
That leaves his total place pretty clear. Gold can stay unstable within the close to time period as buyers grapple with rates of interest, inflation and the fallout from the Iran battle. However the structural improve in central-bank demand might stay a strong pressure beneath the market.
