Another year of smashing expectations. We are barely a month into the new year, and it would be an understatement to say that gold has defied all investor expectations. The precious metal rallied to a staggeringly new all-time high of USD5,595/oz. on 29 Jan on the back of persistent geopolitical uncertainty (Venezuela, Iran, and most recently Greenland) and a slew of dollar negative developments (criminal probe into Fed Chair Jay Powell and Trump’s comments favouring a weaker greenback) before reversing course and melting down more than 15% in the wake of Kevin Warsh’s nomination as the next Fed Chairman. These substantial price swings speak to the elevated levels of speculative flows in the precious metals space amid persistent macro policy risk and geopolitical uncertainty. But beyond speculative flows, we believe there is an ongoing shift in investor attitudes that is driving adoption of gold as a mainstream portfolio hedge.

Same tailwinds, greater intensity. This recent bout of extreme volatility serves as a reminder that attempts at timing the market rarely work out as intended. Having said that, we encourage investors to look past prevailing market volatility and focus on gold’s fundamental drivers. We have long touted: i) debasement risk; ii) geopolitical and macroeconomic uncertainty; and iii) central bank buying as structural tailwinds for gold, and we believe they continue to be in play today. In fact, many of these tailwinds have intensified over time. We elaborate on each of these tailwinds below, exploring how they have changed over time in terms of scope and magnitude.

Widening scope of debasement risk. Worries about fiscal sustainability and fiat currency debasement have worsened over time. What started out as primarily a US concern has evolved into a global risk as other countries ramp up their fiscal spending. Europe, with its multi-year rearmament drive, is set to increase defence spending from 2% to 5% of GDP by 2035. Japan’s Takaichi has also announced plans for expanded government spending and tax cuts following her landslide victory in February’s snap elections. China’s growth has, for years, been tied to government policy stimulus. ASEAN countries such as Thailand, Vietnam, and Indonesia are also walking a tightrope between stimulative spending and managing debt. On the US front, debasement risk has also expanded to capture anything that is perceived as a threat to Fed independence (as evidenced by gold prices reacting to Trump’s criminal probe into Fed Chair Jerome Powell). In summary, the scope of debasement risk has widened over the past year and that will continue to drive the appeal of gold as a fiat currency debasement and dollar hedge.

Not at tipping point (yet). A common refrain of the debasement thesis is that if debasement was such a huge threat to the global monetary system, there would be cracks in currency and bond markets, and so far, there is limited evidence of that. We have seen the dollar weaken and the US Treasury yield curve steepen, but nothing outside of normal historical ranges. The apparent disconnect between the price of gold and currency and fixed income markets, we believe, is due to two reasons: i) while confidence in fiat currencies has waned, there is no alternative to the global fiat monetary system. Therefore, market participants will continue to operate within that system, albeit with a growing urgency to hedge against it with hard assets like gold; ii) bond yields remain calm partly due to government measures to ensure there is sufficient liquidity in the system (e.g. quantitative easing). Ironically, the very thing eroding confidence in the fiat monetary system is simultaneously keeping it afloat for now. Therefore, while the trajectory of global fiscal and monetary policy looks increasingly untenable, it has not reached the tipping point of a full-on change in monetary regime yet. We argue that the debasement trade still has legs. Comparing gold to US equities (another ubiquitous asset class) we can see that gold remains relatively undervalued.

From episodic to chronic uncertainty. Geopolitical uncertainty's effect on gold buying has evolved over time. In the past, geopolitical risk events would trigger short-term flows into the asset class, but such flows would promptly unwind once there is a resolution, or after markets normalise the event after a period of no escalation (e.g. Russia-Ukraine). Today, however, risk events are happening with such frequency that geopolitical uncertainty has become more structural than episodic. Case in point, 2026 has already seen three instances of military conflict or tension in the form of Venezuela (capture of Maduro by US troops), Iran (US military build-up across the Middle East), and Greenland (US-NATO tensions). In response to chronically elevated geopolitical tensions, we are seeing much more durable and persistent geopolitical risk premiums attached to gold; investors are increasingly holding gold for the long haul rather than just during period of acute market stress.

Growing fears of a capital war. The 2022 Russia-Ukraine conflict highlighted sanctions risks associated with holding dollar-denominated assets. That started a movement among central banks to diversify their foreign exchange reserves with more neutral assets like gold. Today, this trend of deglobalisation and reserve diversification continues to gain momentum as Trump’s recurrent use of military force and punitive tariffs have driven a deeper wedge between America and the rest of the world. Ray Dalio famously remarked that the world is “on the brink” of a capital war, a situation where countries resort to using foreign exchange and capital controls as a form of political leverage. As the Trump administration continues to swing its wrecking ball through established political and economic alliances, gold will remain well bid as a portfolio risk diversifier. It is also worth noting that hedging against the downfall of an American-led world order is not exclusive to sovereign institutions, retail and high net-worth investors are increasingly doing it as well. Goldman Sachs reported an increase in physical gold-buying by high net-worth families and a rise in investor call-option demand. Anecdotally, we have also noticed a clear increase in client interest for physical gold since 2025. 

Record investment demand for gold. If central banks are not the next “incremental” buyer of gold, then who is? From a demand perspective, the main gamechanger in 2025 was investment demand. Total investment demand grew 84% y/y to reach 2,175 tonnes in 2025. Of that total, 1,375 tonnes came from physical demand (bar and coin) – a 13-year high – and 801 tonnes came from ETFs. We believe that the confluence of rising debasement risk and chronically elevated levels of geopolitical uncertainty is driving a shift in investor attitudes towards risk-hedging. Investors are increasingly partial to the idea of having permanent or semi-permanent allocations to risk diversifiers like gold because they perceive fragility in the current world order. In other words, investors are raising their bets that ‘bad times’ are just around the corner and are positioning their portfolios for it. 

ETF bull run in progress. The rise in hedging behaviour among investors is reflected in gold ETFs, which have seen positive inflows for the past eight consecutive months. We are about 90 weeks deep in the current ETF bull market and holdings have increased by 1,065t. This is still far below what we saw in the 2008 and 2016 ETF bull markets, which lasted 221 and 253 weeks, and added 1,823t and 2,341t in holdings respectively.

Raising our 2H26 target price to USD6,250/oz. Given the intensification of debasement risk and geopolitical uncertainty, we believe that central bank and investment demand for gold will continue to be robust moving forward. Accordingly, we are upgrading our 1H26 and 2H26 target prices to USD5,300/oz. and USD6,250/oz. respectively. These target prices are based on a DXY forecast of 94.3 and 92.5 and 10Y US Treasury yield of 4.1% and 4.25% respectively. They also assume a combined central bank and investment demand of 700 tonnes per quarter. It is worth reiterating that these are fair value estimates for gold’s prices given certain underlying assumptions, however amid the elevated volatility that we are seeing in the precious metals market, actual prices can routinely overshoot or undershoot these targets.

Long-term forecast: USD8,060/oz. by 2030. Our long-term forecast is based on a framework that uses global nominal GDP growth, with global equity and bond market capitalisation growth as an offsetting factor, to estimate a normalised growth rate for gold. Using street estimates of long-term capital markets assumptions, we arrive at an estimated annualised return of c.6.6% for gold over a 10 – 15-year horizon (based on annual nominal GDP growth of 5.1%, and AC World Equity return of 7.0% and World Government Bonds return of 4.3% with a 60/40 weightage respectively). Applying this growth rate to our end-2026 TP of USD6,250/oz., we arrive at a 2030 TP price of USD8,060/oz.

Volatility warrants more caution and nuance. The heightened volatility we are seeing in the precious metals market underscores additional consideration for gold investors. Some key things to note include being more judicious with the use of leverage as sharp price movements can potentially trigger margin calls and forced selling. For clients who do not have exposure to gold yet, buying on dips is a sensible strategy given elevated volatility. For clients who are long gold, consider hedging the exposure against sudden price drops with put options. For clients who have a higher risk tolerance and wish to monetise their existing gold exposure, options writing strategies are worth considering.

Figure 1: Gold saw extreme volatility in the first month of 2026