September 2025 Gold Market Overview: The Unconventional Rally

In early September 2025, gold prices surged to a new all-time high, reaching an intra-day peak of USD 3,578/oz. This rally, which began in the second half of August, saw gold's price strengthen by 42.8% year-over-year (YoY). What makes this rally particularly notable is that it occurred despite a steady U.S. dollar and stable asset market volatility, factors that typically don't coincide with strong precious metals performance. 

Key Drivers Behind the Gold Rally

The impetus for the rally appears to be a mix of speculative demand and heightened concerns about U.S. economic policy and Federal Reserve independence.

• US Federal Reserve Independence: The sustained criticism of the Federal Reserve by the Trump Administration has raised concerns about the central bank's independence. This has led to increased demand for gold as a precautionary holding.  
• Economic Policy Uncertainty: Elevated economic policy uncertainty, along with renewed concerns about U.S. equity valuations, also appears to be supporting gold prices.  
• Monetary Conditions: There are indications that the U.S. Federal Reserve might cut the Federal Funds rate by up to 50 basis points (bp) by the end of the year, which would likely weigh on the U.S. dollar and further support gold. The CME FedWatch tool projects a 96% probability of a 25 bp cut at the September 17th Open Market Committee meeting.
• Unusual Rally Factors: Typically, precious metals rally during periods of easing monetary conditions (falling interest rates or a weaker U.S. dollar) or heightened risk aversion. This current rally is unusual because it's happening without those typical drivers. The S&P 500 VIX index and the MOVE index of U.S. bond market volatility both remain at low, stable levels. 

Gold is Not a Bubble—Yet

Despite the significant price increase, gold is not in a bubble phase.

• Valuation: When adjusted for U.S. consumer price inflation, gold is about 15% above its long-term real valuation trend since 2000. This is a far cry from the roughly 100% overvaluation seen at its post-millennium peak in September 2021.
• Supply and Demand: The current market dynamics don't align with a bubble. Mine supply was almost unchanged in the first half of the year, despite high profitability, due to capacity constraints. Meanwhile, gold recycling has been robust, which is consistent with rising prices.
• Investor Sentiment: While professional investor demand for gold bars has been strong, speculative interest in gold has softened. Net open non-commercial futures holdings on COMEX are close to their average for the last decade, and gold-backed ETF holdings have seen a moderation in demand in July and August. 

Silver's Outperformance 

Silver has recently outperformed gold, surging to a multi-year high of USD 41.46/oz, a 10.2% month-over-month (MoM) increase.

• Mint Ratio: As silver's price rose faster than gold's, the Mint Ratio (the ratio of gold to silver prices) fell to 86.4:1. This is well below its 2025 peak of 104.7:1.
• Supply and Demand: Silver's strength is supported by a supply deficit and strong investor demand. The Silver Institute estimated a silver deficit of 117.7 million ounces (Moz) in their April 2025 survey, marking the fifth consecutive year of a deficit. Rising demand for silver in New York and London has driven scarcity and a lift in leasing rates. * Market Volatility and Liquidity: silver's higher volatility, compared to gold, is consistent with its outperformance during periods of lower volatility in asset markets. The silver market is also less liquid than the gold market.

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