Wall Street Wants You to Buy Gold. It’s Still Risky.
Wall Street has gold fever. Investors should be careful.
3 min
J.P. Morgan and Goldman Sachs advise continuing to hold gold. BNP Paribas just raised its forecast for gold prices. For months now, BlackRock has recommended buying gold to diversify portfolios.
So far, the recommendations have been spot on. The most active gold futures contract hit another record high on Thursday, closing at $2,991.30 an ounce, marking its tenth record close in 2025. The popular SPDR Gold Shares exchange-traded fund, which tracks gold bullion, also closed at a record of $275.13.
But the megarally isn’t without risks.
Gold has now closed at record levels 10 times this year, after closing out its best year in over a decade, with 46 records in 2024. Drivers for the rally have been plentiful: Strong buying from central banks, a weaker dollar, realignment of international relationships as President Donald Trump slaps tariffs on goods from the U.S.’s closest allies, and wars abroad have pushed investors to seek safety in gold.
The conventional wisdom says the path of least resistance for gold is higher in part because prices are above their 200- and 100-day moving averages of $2,619.51 and $2,756.11, respectively, based on Wednesday’s close. When a price moves above its moving average, it is a sign that an uptrend is likely to continue.
BNP Paribas forecasts gold prices will rise above $3,100 an ounce in the second quarter of 2025. It assumes the average gold price in 2025 will be $2,990, 8% higher than its prior forecast. A price of $3,100 would represent a gain of 5.2% from its closing price on Wednesday.
“The biggest change to our previous view is the impact of the Trump tariff threats, which is resulting in fears of renewed US inflation on the one hand, and slower US and global growth expectations, on the other, driving increased safe-haven demand for gold,” David Wilson, senior commodities strategist as the bank, said in a research note Wednesday.
Still, when optimism is so widespread, it is smart to also consider the risks, even with investments such as gold that are famous for being safe.
For one, it could be said that the metal is overvalued, given that it has been in a bull market since September 2022. That raises the prospect that gold has already priced in much of its potential over the period, leaving it vulnerable to corrections. Those gains could tempt early investors to sell to lock in profits.
Gold could also struggle in a world where Washington’s efforts to overhaul the federal government prove successful, even if economists have their doubts. Trump and Elon Musk’s Department of Government Efficiency is slashing the federal workforce, which the administration has said will boost productivity, critical for economic growth, as laid-off government workers find more productive jobs in the private sector.
Economic growth and gold are inversely related. When the economy is booming, investors tend to favor riskier assets like stocks over gold, which loses its appeal.
“Such a development would be terrible news for gold whose price may then return to its historical norm, as expressed in oil-equivalent terms,” wrote Charles Gave, founder of Gavekal Research, in a research note on Wednesday. This implies a 50% fall, the note says.
On the other hand, there are plenty of reasons why prices could keep rising. An index of economic uncertainty index is high, while more tariffs would lead to inflation, both benefiting gold. The possibility that the U.S. government might value its gold holdings at market prices, rather than the current $42.2222 an ounce, would help as well.
Treasury Secretary Scott Bessent triggered speculation about revaluation in early February , saying the U.S. wants to monetize its balance sheet. He dismissed the idea in an interview with Bloomberg last month, but market chatter about the topic continues.
Revaluing the U.S.’s gold holdings would show interest in the commodity by the government, potentially adding to the momentum in the price. The statutory price of gold, set by law , hasn’t moved since 1973.
The evidence for gains is strong. Just don’t completely ignore the risks when putting your money to work.
Corrections & Amplifications: The most active gold futures contract closed at $2,991.30 on Thursday. An earlier version of this article incorrectly said it closed at $2,984.30, the price of the front-month contract.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com undefined undefined
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Technology and semiconductor shares fell sharply as investors questioned the debt financing the AI infrastructure boom and confronted higher rates and Chinese competition.
Technology and semiconductor shares fell sharply as investors questioned the debt financing the AI infrastructure boom and confronted higher rates and Chinese competition.
4 minA sharp technology sell-off has exposed a new anxiety on global markets: whether the enormous borrowing behind the artificial-intelligence infrastructure boom can generate sufficient returns as interest rates rise and Chinese competition intensifies.
The artificial-intelligence investment boom has powered technology shares, semiconductor manufacturers and data-centre operators to extraordinary heights. Last week, investors were given a reminder that much of this expansion is being built with borrowed money.
The technology-heavy Nasdaq Composite fell 4.5 per cent over the week ended October 16, its weakest performance since late June. Semiconductor shares suffered an even deeper correction, with the Philadelphia Semiconductor Index losing about 11.4 per cent.
The selling spread quickly through global markets. Micron Technology fell 14.6 per cent over the week, while South Korea’s Samsung Electronics and SK Hynix dropped approximately 18 per cent and 24 per cent respectively.
This was more than a routine bout of profit-taking. Investors were reassessing three interconnected risks: higher interest rates, the rapidly expanding debt burden attached to AI infrastructure and the prospect of stronger competition from Chinese memory-chip manufacturers.
The debt behind the AI build-out
Artificial intelligence requires a physical infrastructure network of enormous scale. Data centres must be built, advanced processors purchased, power supplies secured and cooling systems installed before customers begin generating meaningful revenue from them.
Technology companies are increasingly supplementing their own cash with corporate bonds, syndicated loans, equipment leases, private credit and project-level financing.
JPMorgan describes the emerging funding model as a combination of conventional corporate borrowing and project finance tied to individual data-centre assets. In Australia, the Reserve Bank estimates that syndicated loans accounted for approximately three-quarters of data-centre financing during 2025 and 2026 to date.
The numbers are becoming large enough to affect broader credit markets. The Federal Reserve Bank of Dallas has cited Wall Street estimates suggesting AI-related investment-grade bond issuance could approach US$300 billion in 2026 alone.
That borrowing is not automatically problematic. Debt can be an efficient way to finance long-lived infrastructure when future revenue is sufficiently predictable. The concern is that AI technology, customer demand and computing economics are changing much faster than the repayment schedules attached to the assets.
A data centre financed today may carry debt for years. Investors must therefore make assumptions about future utilisation rates, electricity prices, chip performance, customer concentration and the amount businesses will ultimately pay for AI computing.
When interest rates rise, those assumptions become less forgiving.
Inflation changes the calculation
September’s US inflation data intensified the pressure. Consumer prices increased 3.7 per cent over the year, ahead of market expectations and up from 3.4 per cent in August.
The hotter reading reduced confidence that interest rates would fall quickly and pushed bond yields higher. That matters particularly for companies whose valuations depend on profits expected well into the future, as well as highly leveraged infrastructure operators that may need to refinance.
CoreWeave has emerged as a closely watched test case. The specialist cloud-computing company has accumulated substantial debt and lease obligations to build AI capacity, while relying on a concentrated group of large technology customers.
Its shares fell sharply during the sell-off, while the cost of insuring its debt against default climbed. CoreWeave has argued that its contracted backlog more than covers its obligations and that financial markets do not always understand its business model. Nevertheless, its securities have become a proxy for investor confidence in debt-funded AI infrastructure.
Oracle, another major investor in AI computing capacity, fell 8.8 per cent in Friday trading, while CoreWeave dropped 15.5 per cent.
The question is shifting from how much AI infrastructure can be built to how profitably it can be operated.
China adds another source of pressure
Interest rates were not the only catalyst. Reports of advances by Chinese memory-chip producer ChangXin Memory Technologies raised concerns that lower-cost Chinese products could increase competition across the global semiconductor industry.
Memory chips are essential to AI systems, but the industry is historically cyclical. Periods of tight supply and high pricing can encourage rapid investment, eventually producing oversupply and falling margins.
The prospect of a well-funded Chinese competitor expanding its technological capabilities unsettled investors in Samsung, SK Hynix and Micron. It also demonstrated that AI-related demand does not insulate chipmakers from conventional competitive pressures.
That combination—slower rate cuts, more expensive financing and potentially cheaper supply—challenged the assumption that every company exposed to AI would enjoy continually expanding margins.
A reset rather than the end of the boom
The sell-off does not establish that the AI boom is ending. Demand for computing power remains strong, the largest technology companies continue to generate formidable cash flows and many infrastructure projects are backed by long-term customer contracts.
What has changed is the market’s willingness to overlook the price and financing structure of that growth.
The most resilient companies are likely to be those able to fund investment from operating cash flow, secure long-duration customers and demonstrate that new capacity will earn returns comfortably above its financing costs.
More speculative operators may face greater scrutiny, particularly where debt is expensive, customers are concentrated or expected revenue depends on demand that has not yet materialised.
For Australian investors, the lesson extends beyond US technology shares. Local data-centre operators, infrastructure funds, electricity suppliers and property groups are increasingly exposed to the same investment cycle.
Artificial intelligence may remain one of the defining growth themes of the decade. But last week’s correction showed that enthusiasm for the technology does not eliminate financial discipline.
The next stage of the AI boom will be judged not only by computing power, model performance or demand for chips, but by something more traditional: whether the assets being financed can generate enough cash to repay the money borrowed to build them.
Fact box
Nasdaq Composite: Down 4.5 per cent for the week ended October 16, 2026
Philadelphia Semiconductor Index: Down approximately 11.4 per cent
Micron Technology: Down approximately 14.6 per cent
Samsung Electronics: Down approximately 18 per cent
SK Hynix: Down approximately 24 per cent
US September inflation: 3.7 per cent annually
Estimated 2026 AI-related investment-grade issuance: Approximately US$300 billion
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