Central banks raising their purchases of precious metals – particularly gold – has been credited for some of the asset class’s standout performance in recent years. But, for Jupiter’s Ned Naylor-Leyland, the rise has been fundamentally misunderstood.
Certainly, central banks’ holdings of gold have ballooned in recent years, according to data from the World Gold Council, outpacing the number of US treasuries held by the end of 2025.
This came alongside an enormous rally in precious metals, with gold and silver rising 108.4% and 155.6% respectively over the past three years.
However, Jupiter’s Naylor-Leyland argued: “People talk about it being something to do with central banks, but that’s just not how it works.
“There are two cohorts that tend to participate in gold and silver: One is the investment community and the other is the speculator,” he continued. “What drove the price of gold in 2024 and 2025 was the speculator, not the investor.”
Speculators, he argued, were treating precious metals as a “shiny new toy” to play on interest rate expectations, because they were a high-beta asset.
See also: Knacke’s money maps: The rise in gold demand is not merely a sentiment trade
When rate expectations moved heavily due to continued conflict in the Middle East, “speculators basically got it wrong all at once”, and were forced to sell out.
This, he argued, is behind the performance of gold and silver year-to-date, with the S&P GSCI gold and silver spot price index down 0.4% and 10.3%, respectively, according to FE fundinfo data.
“I’ve never seen the gold/silver dollar price fall 3% a day, much less 10% a day like it did this year,” Naylor-Leyland said.
If long-term investors or central banks were behind the rally, the precious metal price would not have slid as much in the first quarter because they do not need to sell to meet redemptions, he continued.
Longer-term investors will only commit long-term capital to gold and silver when their existing holdings in other parts of the portfolio decline, according to the Jupiter manager.
“It’s one thing saying gold is really going up, but if what you already have is going up and you’ve got big gains, am I forced to move across into gold?” he asked. “The answer for most investors is no.”
The evidence for this, he said, was the amount of physical gold and silver held by ETFs, which never surpassed the 2020 high (about $1,900 per oz).
“This is the best single proxy for investor interest, because if an investor wants to buy precious metals, their first point of call is almost always a gold ETF,” he said. “Only after that do people really start looking at miners or silver.”
However, this lack of involvement from long-term investors and current lack of leveraged capital from speculators meant the asset class had some exciting long-term potential, he argued.
“From my perspective, what I’m seeing is a floor in the gold and silver price that’s almost double what it was beforehand.”
With neither cohort of investors investing in precious metals, the outlook could be much more positive when the market finally switches from extreme hawkishness to dovishness, Naylor-Leyland said.
See also: Why gold remains a core asset despite a ‘perfect storm’
This was particularly pronounced in the silver market, which is one of the most essential raw materials in a world obsessed with hyper optimisation, he said. Because it is a highly conductive metal, it plays incredibly well into the market’s continued focus on AI.
Solar panels, which are expected to account for 30% of data centre electricity, require around 15 grams of silver, while the market faces incredibly tight supply, he noted.
On top of this, parts of the market are still incredibly cheap, he noted, specifically mining equities, which gives even more potential for a rally.
Gold producers trade at roughly 70% of their net asset value, but have almost 50% pre-cash-flow margin, and have just become cheaper as investors have refused to buy them, he explained.
Over the past three years, the FTSE World Precious Metals and Mining index is up 180.2%, while the wider FTSE All World is up just 65%.
“This is one of the most profitable parts of the global equity market, trading at one of its lowest-ever valuation metrics,” he noted. “Do I like that? Yes, I do.”
See also: Baker Steel appointed investment manager of Golden Prospect Precious Metals
