Sergey Diakov
Gold's rally has become so powerful that many investors are beginning to question whether prices have moved too far, too fast.
According to the latest Bank of America Global Fund Manager Survey, the share of investors who believe gold is overvalued has climbed sharply alongside the metal's price. The percentage of fund managers describing gold as expensive recently reached one of the highest readings of the past two decades, while bullion prices pushed to fresh record highs.
The chart highlights a striking divergence. As gold climbed through 2024, 2025, and into 2026, concerns about valuation rose dramatically. Yet rather than triggering a correction, those concerns appeared alongside one of the strongest bull markets in the metal's history.
Investors Think Gold Is Expensive - But They Still Want It
A positive reading in the Bank of America survey means more investors view gold as overvalued than undervalued. That measure has climbed from negative territory during 2022–2023 to more than 30% in recent surveys. Historically, such readings often emerge after extended rallies when valuations become increasingly difficult to justify using traditional metrics.
Yet gold continues attracting capital. This apparent contradiction reflects the unique role gold plays in financial markets. Unlike stocks or bonds, gold is often purchased not because investors expect rapid earnings growth or attractive yields, but because it serves as a store of value during periods of uncertainty.
As geopolitical tensions persist, fiscal deficits expand, and concerns about long-term currency stability remain elevated, many investors appear willing to tolerate higher valuations in exchange for protection against macroeconomic risks.
Central Banks Continue Accumulating Gold
One reason gold continues to rise despite valuation concerns is persistent demand from central banks. According to World Gold Council data, several countries significantly increased gold reserves during the first quarter of 2026. Poland added more than 31 tonnes, Uzbekistan purchased roughly 25 tonnes, while Kazakhstan increased holdings by more than 12 tonnes. China also continued adding to its reserves.
The broader reserve snapshot highlights how widespread official-sector demand remains. The United States continues to hold more than 8,100 tonnes of gold reserves, while China holds approximately 2,313 tonnes, India more than 880 tonnes, and Poland nearly 582 tonnes.
Unlike speculative investment flows, central-bank purchases are typically motivated by long-term strategic considerations. Diversification away from foreign currencies, reserve security, and protection against geopolitical uncertainty have become increasingly important priorities for monetary authorities around the world. As a result, central banks have become one of the most consistent sources of demand in the gold market, helping support prices even when investors question valuation levels.
Real Interest Rates Remain Historically Low
Another factor supporting gold is the behavior of real interest rates. Historically, gold tends to perform better when inflation-adjusted bond yields remain low because the opportunity cost of holding a non-yielding asset declines.
Although U.S. real yields recovered from the deeply negative levels seen during 2020–2021, they remain far below the levels common during the 1980s and much of the 1990s, when real rates frequently exceeded 4% and at times approached 7%. Today, real yields are closer to 1.5–2.0%, remaining near the lower end of their long-term historical range. This environment continues to support demand for alternative stores of value such as gold, particularly among investors seeking portfolio diversification.
The relationship is important because many market participants increasingly view gold as a macroeconomic hedge rather than a simple commodity investment. As long as real returns on government bonds remain relatively modest, the appeal of holding gold remains intact.
The Bull Market Faces a New Test
The key takeaway from the latest data is not that investors are abandoning gold. In fact, demand remains remarkably resilient. More fund managers may now describe the metal as overvalued, but central banks continue accumulating reserves, while relatively low real yields preserve a favorable backdrop for non-yielding assets. Together, those forces help explain why gold has continued rising despite increasingly stretched sentiment indicators.
The next phase of the rally may depend less on investor enthusiasm and more on whether the macroeconomic conditions that fueled gold's ascent remain in place. If central-bank demand stays strong and real yields remain contained, valuation concerns alone may not be enough to derail the trend.
Sergey Diakov
