Gold could climb dramatically this year if central bank policy becomes more supportive and geopolitical pressure continues to weigh on the U.S. dollar, SBG Securities warns. In a client note, analyst Adrian Hammond set out scenarios in which bullion rallies to levels as high as $10,000 an ounce should the U.S. Federal Reserve adopt a notably more dovish stance.
Hammond characterizes the current phase of the market as gold's "last leg," where the metal's price action is increasingly governed by macro forces rather than the leverage historically provided by gold producers. "We estimate that it no longer pays investors enough to hold gold equities over gold metal. Earnings are so "in the money" that there is no meaningful leverage from rising prices from this point," he wrote.
That shift alters the relationship between bullion and the share prices of miners. Hammond points out that a 10% increase in gold from a $3,000-per-ounce base once translated into roughly 30% earnings growth for producers. From current price levels, however, the same percentage move now produces nearer to 13% in earnings gains, effectively making many major producers trade as linear proxies for bullion rather than leveraged plays.
Some higher-cost operators retain more exposure to price upside, Hammond notes, identifying Harmony Gold (NYSE:HMY) and Sibanye Stillwater (JO:SSWJ) as examples that still carry relatively greater leverage. Yet he flags growing sectoral headwinds - cost inflation, capital spending that is moving ahead of inflation, a pick-up in M&A activity and rising resource nationalism - and says these factors underpin his neutral stance on gold stocks even while he sees further upside in bullion of roughly 20% to 30% this year.
Monetary policy expectations remain central to the outlook for gold. Markets were pricing in two rate cuts this year at the time of Hammond's note, but he sees scope for more easing. "Three cuts could push gold to $7,000 by year end (SBG’s base case) and a more dovish Fed may send gold to $10,000," he wrote, laying out a path from the degree of policy accommodation to the scale of bullion's advance.
At the same time, Hammond regards holding rates steady as the "more prudent" outcome. He argues that a weaker dollar is already feeding into U.S. inflation and that higher energy prices could further amplify that effect. He adds he is "constructive on oil, which could send inflation even higher," and cautions that rising energy costs could ultimately work against bullion if gold prices run too far ahead of fundamentals.
The analyst warns of the real possibility of overshooting fair value. An excessively dovish market narrative could, in Hammond's view, "come back to sting gold if it overshoots," especially in a situation where policy turns out to be tighter than market participants anticipate. Even so, he does not foresee a sharp unwind should an overshoot occur, because inflation remains structurally supportive for bullion over the longer term and should limit any meaningful pullback.
Hammond highlights a distinct near-term risk: dislocation caused by political pressure for rate cuts that pushes gold higher while the Federal Reserve remains more cautious. That mismatch between market or political expectations and actual policy could drive short-term volatility.
Demand fundamentals are also providing support. Central bank purchases continue, with global reserves rising by another 45 tonnes in November. China's official gold holdings climbed to a record 2,304 tonnes by the end of the third quarter of 2025, and the People’s Bank of China added gold every month last year, bringing reserves to 8.5% of the country's total holdings.
Investment flows have turned supportive as well. Gold ETFs added about 16 million ounces in 2025, while speculative positioning on COMEX became more bullish, with net long exposure increasing sharply into year-end. Hammond says recent price strength has been reinforced by a weaker dollar and rising global political risk even as rate expectations had moved toward being more hawkish than they were late last year.
Short-term pullbacks remain possible if geopolitical tensions ease or if policy stays tighter for longer, but the broader trend, Hammond argues, still points higher for bullion. Investors and market participants face a mix of upside driven by macro dynamics and central bank demand, set against sectoral risks in the mining industry and the possibility of policy-driven dislocations that could create volatility.