Published October 17, 2025
It’s time we talk about the parabolic rise in precious metals.
Below, Delta Research offers a very brief overview of gold’s ascent while also noting that major bank earnings this week were generally positive. They do not mention that some of the smaller ‘regional’ banks have been hit this week on word of problematic loans. That sparks concerns that there may be a more “systemic” loan issue that will show up if the economy meaningfully slows. Time will tell. Meanwhile, the incredible rise of the yellow metal has continued this week, unabated. Here’s more:
“Gold is having its best year since 1979. Gold ETFs such as GLD and PHYS are up about 60% year-to-date. Gold is a commodity that does not generate earnings or pay dividends. Roughly 45% – 50% of annual demand comes from jewelry, ~10% from technology, with the remainder from investment and Central Bank reserves.
Given this year’s significant appreciation, it’s worth examining what’s driving the move. The primary driver of gold price appreciation has been Central Bank accumulation of gold as a reserve asset. In the past year, gold has gone from 15% of global central bank reserves to over 22% – an enormous increase in a very short time. A weaker dollar and stickier-than-expected inflation are providing additional support.
For context, from 2000 to 2011, central banks were accumulating gold reserves. The price of the metal rose from $250/ounce to around $1800/ounce, dropping back to under $1500 where it traded until the pandemic in 2020. Gold popped to $2000 then before taking flight in late 2023. Gold has moved from $2000 to $4300 in two years including a staggering +30% move just in the past three months. What will halt its rise?
Central Banks are accumulating gold for a plethora of reasons:
• The US dollar is down ~10% year-to-date. Gold is a way to diversify away from the dollar, the euro and other fiat currencies.
• Gold, unlike foreign-currency assets, cannot be frozen – an important consideration for countries facing potential sanctions – making it a hedge against geopolitical risk.
• Gold is highly liquid and can be converted into hard currency quickly and efficiently.
• Gold is widely viewed as an inflation hedge.
If you believe geopolitical risk, sovereign debt, inflation and dollar debasement will remain elevated for the foreseeable future, it is reasonable to expect continued support for gold prices.
Third Quarter Earnings Season (So Far)
Several of the largest banks have reported record earnings with no meaningful deterioration in credit quality. Consumers and small businesses remain healthy and resilient, and consumer spending continues to grow at a mid-single-digit pace year over year. Overall, results so far are reassuring for the state of the consumer, credit quality, and the earnings trajectory. The strong start suggests a fourth consecutive of double-digit earnings growth versus a consensus expectation of 8%.
Follow Up: Time to Go Small (October 10, 2025)
Last week, we wrote that small-cap stocks (the Russell 2000 Index IWM) looked attractive based on consensus earnings expectations, relative valuation and low correlation between how individual stocks are trading. Another positive data point this week: small business hiring plans have ticked higher recently and offer another reason to be constructive about the investment prospects of smaller companies.
Market Update
Stocks remained turbulent this week as earnings season kicked off. Monday brought a modest rebound from the prior Friday’s “100% tariff on China” selloff with stocks recouping about half of the Friday plunge, or +1.5%. Stocks rebounded from a weak open Tuesday rallying to a mixed finish. Continued noise around the China-U.S. trade spat kept volatility high. Fed Chair Powell seemed to agree with investors that as many as two more interest rate cuts are on tap this year. Strong earnings from the nation’s largest financial institutions kept investors mostly positive Wednesday. Stocks rose only fractionally though as caution remained high. The VIX volatility index closed above 20, a key line in the sand for the index marking elevated concern among investors. Thursday opened with shares of semiconductor contract manufacturer TSMC rising on a strong earnings report. However, concerns about regional banks undid the positive market tone. Reports from a couple of regional banks of significant loan losses sent shares of financial companies lower weighing on the market overall. Stocks closed the day down -0.7% while the 10-year U.S. Treasury bond yield fell below 4% for the first time since a brief breach on Trump’s Liberation Day announcement. The bond’s yield drops when investors buy bonds while seeking a safe haven. Friday brought an easing in the tensions with another couple of financial firms posting solid earnings and President Trump posting upbeat notes about future trade deals with China. Stocks rose throughout the Friday session to a +0.6% close. The 10-year Treasury note rose back above 4%.
Despite the most volatile week in months, stocks managed to bounce back from the prior week’s losses. The S&P 500 (SPY) chopped its way to a +1.74% weekly gain. The Nasdaq 100 (QQQ) added +2.45% to fully recover the prior week’s downdraft. Small cap stocks (IWM) rose +2.36% in a very volatile week for the group.
Warm wishes and until next week.