Gold’s 2026 Crossroads: Year of Extremes Sets the Stage
Gold has just delivered one of its strongest annual performances in modern history – more than 50 record highs and a return of over 60 percent in 2025 – fuelled by geopolitical uncertainty, a weaker dollar, and demand for stability. But the World Gold Council warns that 2026 may not offer the same smooth climb.
Gold has been among the top-performing global assets this year, fuelled by heightened geopolitical tensions, marginally lower rates, and widespread diversification into defensive havens.
Central banks have also continued robust purchases well above historical averages, while investment flows surged across regions as volatility in equity and bond markets encouraged de-risking.
Range-Bound Pricing
Current market expectations imply broadly stable growth, modestly lower US rates, and only slight dollar strength, resulting in a gold price that may trade sideways if conditions hold, according to the World Gold Council's latest report issued on Monday.
However, the report stresses that macro outcomes often diverge from consensus and that the probability of tail-risk events is rising across global markets.
If Growth Softens…
A cooling US labour market, waning enthusiasm for AI-driven equity gains, and weaker consumer momentum could trigger additional Fed easing beyond today’s forecasts.
Lower rates and a softer dollar – still historically elevated – would typically underpin gold, supporting gains of 5 to 15 percent in 2026.
Continued central bank buying and new institutional investor demand in Asia may reinforce the trend.
Flight-to-Safety Rally?
A more synchronised slowdown triggered by geopolitical shocks or trade fragmentation could generate aggressive policy easing and intense safe-haven flows.
In that scenario, gold could jump 15 to 30 percent as investors rotate toward hedges and gold ETFs experience substantial inflows from still-low starting levels relative to previous bull cycles.
Reflation Rebound Poses Biggest Downside Risk
Should fiscal-driven US growth outperform and inflation re-accelerate, the Fed may be forced to pause or even hike, lifting yields and the dollar while reviving risk-on sentiment.
That environment could spur outflows from gold, driving a decline of 5 to 20 percent as investors unwind hedges and favour higher-yielding assets.
Two Wildcards
Emerging-market central banks still hold significantly lower gold reserves than advanced economies, leaving room for further accumulation if geopolitical tensions intensify.
Conversely, a sharp slowdown could trigger forced liquidations of gold-backed collateral in India – where more than 200 tonnes of jewellery have already been pledged this year – increasing recycled supply and pressuring prices.
Scenario Planning is Key as Volatility Persists
With uncertainty likely to dominate 2026, gold’s role as a portfolio diversifier remains firmly intact.
Even in bearish conditions, the World Gold Council expects investors to maintain core allocations, recognising gold’s capacity to provide resilience when markets face the unexpected.
