Risk, rates and dollar to drive gold in 2026

STRONG RETURNS AND CROWDED POSITIONING LEAVE MARKET VULNERABLE TO SHARP REVERSALS AMID RECORD RALLY

- BY NIVETHA DAYANAND

The World Gold Council says gold in 2026 could stay range-bound if current conditions persist, but there could be reversals if growth, inflation and rates move away from expectations.

Gold heads into 2026 carrying the weight of an exceptional year. Gold remained on track for its strongest annual gain in over four decades, while other precious metals fell sharply as investors booked profits after a strong, record-setting rally.

Gold has gained around 70 per cent this year and silver more than 150 per cent, with both metals on track for their best annual performances since 1979. Elevated central bank purchases, inflows into exchange-traded funds, and three successive interest rate cuts by the US Federal Reserve have supported the rally.

That kind of run leaves two competing stories in play for the new year. One is that the same forces keep driving gold higher. The other is that strong returns and crowded positioning leave the market vulnerable to sharp reversals. Gold in 2026 is likely to stay active, with the path shaped by the same three levers that dominated 2025: Risk, rates and the dollar.

The World Gold Council's Gold Return Attribution Model shows how broad the rally was. It estimates that a high-risk environment accounted for roughly 12 percentage points of gold’s year-to-date return, with reduced opportunity costs from a weaker dollar and slightly lower rates adding another 10 percentage points. Momentum and investor positioning added about nine points, while economic expansion contributed around 10 points.

The balance across drivers matters because it suggests gold was not riding a single wave that can fade overnight. It also suggests that if more than one driver turns at the same time, the reversal can be fast.