Decoding gold rally: Why yellow metal surged 15% in one month and should bullion be in your portfolio?

After a sharp rebound, gold surged by 15% in a single month, marking its strongest rally in over four months. The precious metal is still 16% below its 2025 high of $5,500, but remains on an upward trajectory.

Gold exchange-traded funds (ETFs) have seen a surge in demand, with about 23 tonnes of gold added to global ETF holdings in the first half of the month. This increased activity was driven by a stronger dollar and efforts by the US Treasury to keep long-term yields under control.

Central banks have also stepped up their gold purchases, adding 288.9 tonnes in the second quarter, a 62% increase from the previous year. South Korea recently returned to the gold market after a 13-year hiatus, further bolstering the trend of official-sector demand.

Central bank demand appears likely to continue its upward trend, with 89% of surveyed central banks expecting global reserves to rise over the next year, and 45% anticipating an increase in their own holdings.

Despite gold's high price, expectations of the US Federal Reserve maintaining interest rates have supported the metal's rally. Gold is traditionally viewed as a hedge against inflation, but higher interest rates generally reduce its appeal due to its non-yielding nature.

The US Treasury recently announced a doubling of buybacks for longer-dated Treasury securities to at least $4 billion per operation, which may put downward pressure on bond yields and further strengthen gold's position.

Gold miners and related stocks could also be attractive investments, according to some analysts. Christopher Wood, Jefferies' Global Head of Equity Strategy, and billionaire hedge fund manager John Paulson argue that the precious metal is likely at the beginning of a long-term bull run, driven by ongoing demand from central banks and the private sector.