Gold has had a remarkable run. After rising roughly 65% in 2025, the metal recorded its strongest annual performance since the late 1970s. Gold then reached fresh record highs in early 2026, briefly touching close to $5,600 an ounce before falling back as volatility returned.
What’s fuelling the rally
Unlike previous gold rallies, this cycle has been driven mainly by official-sector buying. Central banks, particularly in emerging markets, have continued to add gold to their reserves.
This reflects a broader effort to diversify away from the US dollar. It also provides protection against geopolitical and sanctions-related risks.
Central bank demand remains resilient: The World Gold Council expects central banks to buy roughly 850 tonnes of gold in 2026. This would be similar to the previous year’s level, despite the sharp rise in prices in January.
Emerging markets lead the buying: Poland, Kazakhstan, Brazil, China, and Turkey have all increased their gold reserves in recent years. This points to a structural shift rather than a short-term trade.
Private investors have joined in: demand from private investors has also increased. Expectations of interest rate cuts have provided further support for gold prices.
A more cautious second half
Gold’s rise has not been a straight line. Higher energy prices linked to tensions in the Middle East have increased inflation concerns. They have also reduced expectations of near-term rate cuts.
This combination can put pressure on non-yielding assets such as gold. Some of the sharpest weekly declines of the year came after the January peak.
The recent moves show that even a structurally supported rally can experience significant swings.
What it means for portfolios
Major banks remain broadly positive on gold for the rest of 2026. Their year-end forecasts range from around $4,900 to $5,400 an ounce.
For investors, the current cycle highlights gold’s role as a long-term diversifier rather than simply a short-term trade. Both institutions and individuals are increasingly using gold to hedge against currency, inflation, and geopolitical risks.
The bottom line
Strong and sustained central bank buying suggests that this rally has firmer foundations than previous gold cycles.
However, recent volatility is an important reminder that a ‘safe haven’ is not the same as a ‘risk-free’ asset. The size of an allocation and the investment time horizon still matter.
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