As 2026 approaches, the outlook for gold is shrouded in ongoing geoeconomic uncertainty. The current gold price largely mirrors macroeconomic consensus expectations, suggesting a rangebound performance if present conditions persist. However, the potential for surprises remains high. If economic growth slows and interest rates decline further, gold could see moderate gains. In contrast, a severe downturn marked by escalating global risks could propel gold to perform strongly. Conversely, successful policy outcomes from the Trump administration might accelerate economic growth and reduce geopolitical risk, leading to higher rates and a stronger US dollar, potentially pushing gold prices lower.

Central bank demand and gold recycling trends are among additional factors that could influence the market. Notably, gold's role as a portfolio diversifier and a source of stability remains crucial amid continued market volatility.

Gold's impressive surge in 2025

By the end of November 2025, gold had set over 50 all-time highs and returned more than 60%, positioning it as one of the strongest performing assets this year. This historic rally, which is gearing up to be gold's fourth strongest annual return since 1971, has been driven by several factors. At the macro level, two key influences stand out: a supercharged geopolitical and geoeconomic environment, and generalised US dollar weakness coupled with marginally lower rates. 

This environment has prompted a broader push for portfolio diversification amid lacklustre bond returns and concerns about frothiness in equity markets. As a result, investment demand for gold has surged across all regions, from West to East. Central banks have also continued their buying spree, with demand well above average, even if below the records seen in the previous three years.

The Gold Return Attribution Model (GRAM) indicates that the high-risk environment explains roughly 12 percentage points of gold's year-to-date return, primarily driven by geopolitical risk. Reduced opportunity cost, through a weaker US dollar and marginally lower rates, contributed another 10 percentage points. The combined effect of heightened geopolitical risk and US dollar weakness accounted for roughly 16 percentage points, underscoring the outsized influence of politics and macro uncertainty on gold's performance during Trump’s second term. 

Further, price momentum and investor positioning contributed nine percentage points, while economic growth added 10 points. Notably, the contributions of the four main factors driving gold have been unusually balanced this year. This signals a market driven by diverse forces rather than a single catalyst. However, momentum has played a larger role than in previous years, which is not surprising considering how gold's strong rally has prompted widespread investor interest.

What to expect in 2026

Looking ahead to 2026, markets largely anticipate a continuation of the status quo, but divergences in macro data, laden with a heavy geoeconomic blanket, mean uncertainty will remain high. Concerns about a softening US labour market are mounting, while debates persist over whether inflation will stay stubbornly high or face renewed upward pressure. Despite some progress, geopolitical frictions continue to simmer.

What does this mean for gold? Much like this year, unforeseen events are impossible to anticipate. Still, while their exact nature is unpredictable, the frequency of tail risk events is on the rise. Whether such developments trigger risk-on or risk-off sentiment could play a decisive role in shaping performance across asset classes and gold's role as a strategic diversifier.

The gold price today largely reflects macro consensus expectations related to economic growth, inflation, and monetary policy. This is captured by the rangebound performance shown by the Gold Valuation Framework when market consensus variables are inputted. However, as history shows, the macroeconomy rarely follows the path that market consensus dictates.

In the event of a shallow economic slip, US economic data has been mixed, but market participants are concerned that momentum may be slowing. As risk appetite declines, positioning shifts to defensive assets. Within this environment, a potential reset in AI expectations could act as an additional drag on equity markets. This may result in a softer US labour market, prompting weaker consumer activity and contributing to a broader global growth slowdown.

Against this backdrop, the Fed would likely cut rates beyond current expectations, easing policy in response to rising economic uncertainty and expectations of cooling inflation. This combination of lower interest rates and a weaker dollar paired with heightened risk aversion would create a continued supportive environment for gold. Our analysis shows that, in this environment, gold could rise 5% – 15% in 2026 from current levels, depending on the severity of the economic slowdown and the speed and magnitude of the rate cuts.

Conversely, there is a non-zero chance that the global economy moves into a deeper and more synchronised slowdown, driven by rising geopolitical and geoeconomic risk. Tensions around trade, unresolved regional conflicts, or a new flashpoint may erode confidence and weigh heavily on global activity. These pressures would contribute to a more fragmented global environment and heighten risk sensitivity across trade and investment.

As confidence fades, businesses scale back investment and households pull back on spending, setting off a self-reinforcing "doom loop" that deepens the downturn. US growth weakens further, and inflation falls below target, prompting the Fed to cut rates aggressively. Long-term yields decline sharply, and the US dollar softens as policy eases, contributing to softer global trade and broad commodity weakness. This combination of falling yields, elevated geopolitical stress, and a pronounced flight-to-safety would create exceptionally strong tailwinds for gold, supporting a sharp move higher. Under this scenario, gold could surge 15% – 30% in 2026 from current levels.