Gold poised to continue shining in 2026 amid central bank demand, geopolitical flashpoints

SINGAPORE - Gold’s blazing rally is

set to continue into 2026,

driven by central bank demand, interest rate cuts and simmering geopolitical tensions despite US President Donald Trump’s recent attempts at defusing flashpoints. 

The yellow metal, which rose by over 60 per cent to a record high of over US$4,500 per ounce in 2025, is enjoying its biggest annual gain in 46 years. It has also climbed by more than 130 per cent since 2020, outpacing that of the S&P 500 index, which rose by just over 85 per cent within the same period. 

Despite a

sell-off in late October

that saw gold tumble by more than 6 per cent at its intraday low, analysts expect the precious metal to climb to between US$4,600 and US$4,800 per ounce in 2026. Gold is trading around US$4,510 at the time of writing.

Several factors underpin gold’s prospects for further gains. 

Institutional appetite

Central banks around the world have been aggressively adding gold to their reserves in recent times – a phenomenon triggered by Russia’s invasion of Ukraine in 2022 and the freezing of Moscow’s foreign assets. 

According to the World Gold Council’s Central Bank Gold Reserves Survey 2025, the banks have accumulated more than 1,000 tonnes of gold in each of the past three years – a sharp rise from the 600-odd tonne annual average over the previous decade. 

One of the most active buyers is China – the People’s Bank of China has reported 13 consecutive months of gold purchases as at November 2025. It currently holds over 2,300 tonnes of gold, or slightly more than 8 per cent of the country’s foreign exchange reserves. 

The purchases have sparked debate that the world’s second-largest economy is seeking to reduce its reliance on the greenback, while using gold’s stability and recent price rally to position the renminbi as a more credible reserve currency backed by the precious metal. 

Those concerns have been amplified by Mr Trump’s frequent U-turns on tariff policies, which have led to stock market swings and a weakened US dollar, driving investors towards safe-haven assets such as gold. 

While Beijing’s intentions remain unclear, a June report by the Official Monetary and Financial Institutions Forum noted that central banks around the world are planning to increase their holdings in the euro, gold and renminbi in the next decade. 

Mr Fan Shaokai, head of Asia-Pacific ex-China and global head of central banks at the World Gold Council, noted that central banks do “generally believe” that the US dollar’s proportion of global reserves will continue to decline. 

“Conversely, the majority of respondents in that survey believe that gold’s proportion of global reserves will increase,” he said. 

Mr Robin Tsui, Asia-Pacific gold strategist at State Street Investment Management, noted that while the US dollar remains the world’s primary trading currency, accelerating de-dollarisation and debasement trades, or the weakening of fiat currencies, are prompting more money to flow into gold. 

“Ongoing central bank accumulation continues to support gold’s sustained bull market as strategic allocations rise,” he said. 

Mr Tsui said central banks currently hold about 20 per cent of their foreign exchange reserves in gold, though many emerging market banks, including China, remain below this threshold. 

“We expect central banks to keep increasing their gold reserves as a prudent strategy for managing and diversifying assets,” he said.

Interest rate cuts

The US Federal Reserve lowered rates for a third time in 2025 on Dec 10. 

While policymakers remain divided over further easing, Mr Trump has repeatedly called for lower rates and is also expected to name one of his supporters as the successor to Fed chair Jerome Powell soon.

Interest rate cuts have traditionally boded well for non-yielding bullion because they lower the opportunity cost of holding gold, which does not pay interest.

Rate cuts also tend to weaken the US dollar, which provides more tailwinds for gold since the metal is priced in dollars.

Mr Heng Koon How, head of markets strategy at UOB, said a sudden surge in inflation in the US may result in the unexpected end of a rate-cutting cycle by the Fed.

“This would be a key risk that may cause a correction in gold prices,” he said. 

OCBC foreign exchange strategist Christopher Wong noted that markets may be pricing in two rate cuts for 2026, but gold prices could be hurt if they fall short of expectations.

“A sharp rise in yields could occur if the Fed pauses its rate-cut cycle or cuts less than markets expect, especially if market growth conditions are re-rated higher – this would raise the opportunity cost of holding gold and weigh on prices,” he said.

Stubborn flashpoints

Existing geopolitical tensions may also continue to simmer, prompting investors to seek greater exposure to gold.

So far, Mr Trump’s attempts to quell conflicts around the world – including the war in Gaza and the border hostilities between Thailand and Cambodia – have produced inconsistent results, with tensions reigniting even after the peace deals he brokered. 

Gold has historically rallied during conflicts: it climbed from about US$35 an ounce to US$180 during the Vietnam War between 1965 and 1975, and later surged past US$800 in 1980, at the start of the Soviet Union’s intervention in Afghanistan.

OCBC’s Mr Wong said the geopolitical risk factor is a “double-edged sword”. 

“A surprise de-escalation in geopolitical tensions, whether through a resolution between Russia and Ukraine or improved ties between China and the United States or Japan, could reduce geopolitical risk premiums and sap safe-haven demand, weighing on gold prices,” he said. 

“But a worsening of existing flashpoints, the emergence of new geopolitical stresses, or heightened policy uncertainty would likely push gold prices higher.”

Silver lining

Silver has also had a stellar year, rising by nearly 150 per cent in 2025 to hit around US$72 per ounce at the time of writing – far outpacing gold’s 60-odd per cent gain.

Like gold, silver benefits from safe-haven demand, but it also draws support from industrial use. The metal, which is a better conductor of electricity than gold and copper, is widely used in the production of electric vehicles and solar panels. 

Concerns over possible tariffs have also sparked silver stockpiling in the US, tightening overall supply.

State Street Investment Management’s Mr Tsui noted that like other precious metals, silver had benefited from a weak US dollar, rate cuts and accelerating debasement trades. 

But he noted that while both gold and silver serve the investment, industrial and jewellery sectors, central banks do not consider silver a reserve asset. 

“Silver prices are more volatile than gold, and its demand is closely linked to global economic activity,” said Mr Tsui. 

“In contrast, gold often acts as a portfolio stabiliser during periods of uncertainty, as it is less sensitive to economic cycles.”

Mr Oriano Lizza, sales trader at CMC Markets Singapore, said he expects silver to average between US$55 and US$85 per ounce in 2026.

“If central banks cut rates more aggressively than currently anticipated, I would not be surprised to see temporary spikes towards US$90 or even higher,” he said.

“But a sharper global slowdown that hammers industrial demand could pull prices back towards US$40 to US$50 per ounce.”

Digital gold

In other news, Bitcoin, which has been dubbed digital gold due to its finite design, has had a mixed year in 2025. 

Optimism around the launch of the Bitcoin exchange-traded funds and pro-crypto policies in the US pushed its price to a record high of more than US$120,000 in October, but it has since fallen by nearly 30 per cent and was trading around US$87,000 at the time of writing.

Still, the world’s largest cryptocurrency is becoming increasingly attractive to institutions.

A June report by cryptocurrency exchange Gemini and analytics firm Glassnode found that 30 per cent of Bitcoin’s circulating supply is held by just 216 centralised entities, including sovereign treasuries.

Mr Jeff Mei, chief operating officer of cryptocurrency exchange BTSE, said rising institutional demand bodes well for Bitcoin’s price from a “price stabilisation” perspective.

“It keeps Bitcoin’s price more stable and encourages long-term holding rather than short-term speculation... there is a risk that gradual sell-offs by large players could hurt retail investors, but generally, sovereign wealth funds and other similar institutions don’t dump their positions in a single day,” he said.

On whether Bitcoin could threaten the greenback’s dominance amid its recent weakness, Mr Mei said the cryptocurrency remains far too volatile to be used as currency. By contrast, the development and use of US dollar-backed stablecoins could strengthen the dollar.

Stablecoins are a type of cryptocurrency pegged to a currency, commodity or financial instrument to reduce price volatility.

“The adoption of US dollar-backed stablecoins would increase usage of the greenback, as they are backed by US Treasury bonds and other short-term financial instruments,” he said.

“The more these stablecoins are used, the more underlying US assets issuers have to buy.”