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Gold, which has notched more than 50 record highs this year and delivered a 60.6% return, enters 2026 facing an unusually wide range of possible outcomes as geopolitical tensions, US economic signals and investment flows continue to diverge, the World Gold Council (WGC) said in its annual outlook released on Thursday.
The metal is coming off one of its strongest years since the end of the gold standard in 1971, supported by what the WGC describes as an “extraordinarily charged” mix of global political uncertainty, a softer US dollar and stronger demand from both investors and central banks. Those same drivers — along with potential swings in recycling and collateral-led supply from India — are set to shape the trajectory of gold prices in the year ahead.
The WGC does not issue price forecasts, but its scenario-based modelling suggests gold could finish 2026 anywhere between 20% lower and 30% higher than current levels depending on how global conditions unfold.
A Record-Breaking Year Built on Geopolitical Shockwaves
Gold’s rally this year — already its fourth strongest since the early 1970s — has been unusually broad-based, the Council said. Its Gold Return Attribution Model shows that the four main drivers of gold prices contributed almost evenly to gains in 2025: risk and uncertainty, opportunity costs, economic expansion and momentum.
Geopolitical shocks underpinned roughly one-fifth of the metal’s annual return, as conflicts, sanctions regimes and what WGC analysts called “Trump-term two geoeconomic risk” pushed investors towards safe assets. Meanwhile, a weaker dollar, modestly lower interest rates and a strong surge in investment demand helped sustain price momentum.
Central banks, while not repeating the record purchases of the three preceding years, remained major buyers, particularly across emerging markets, where gold still accounts for a much smaller share of reserves compared to advanced economies.
Baseline: Rangebound, but Risks Tilt to the Upside
The WGC says current gold prices already broadly reflect market consensus: moderate global growth near 2.7–2.8%, around 75 basis points of US interest-rate cuts in 2026, broadly steady bond yields and a slightly stronger dollar.
Such a backdrop, it notes, historically produces rangebound price action.
But analysts warn that economic and political conditions are far from anchored. The frequency of “tail-risk” events — both geopolitical and financial — has risen sharply, reflected in elevated equity-market kurtosis and skew indicators. That leaves gold highly sensitive to unexpected shocks.
Scenario One: ‘Shallow Slip’ Could Send Gold 5–15% Higher
If US economic momentum continues to cool and risk appetite weakens — particularly if the current technology- and AI-led equity run loses steam — the Federal Reserve may deliver deeper rate cuts than currently priced.
A combination of lower yields, a softer dollar and risk aversion would likely lift gold by 5–15%, the Council said.
Any expansion of long-term investment demand — such as newly permitted allocations by Indian pension funds or the continued embrace of gold by Chinese insurers — would add further support.
Scenario Two: A Global ‘Doom Loop’ Could Trigger a 15–30% Surge
The most bullish scenario comes from a deeper, synchronized slowdown triggered by heightened geopolitical flashpoints or worsening trade tensions.
In such a downturn, businesses and households would pull back sharply, reinforcing what the WGC calls a “self-feeding doom loop.” The Fed cuts aggressively, long-term yields fall, the dollar weakens and investors rush for safety. That combination could send gold 15–30% higher next year.
WGC models show that gold ETF inflows — already at US$77 billion this year, adding over 700 tons to holdings — could accelerate dramatically, with room to match previous bull cycles that saw far larger flows.
Scenario Three: A ‘Reflation Return’ Could Drag Prices 5–20% Lower
The bearish case stems from the possibility that the Trump administration’s fiscal and deregulatory push succeeds in stimulating growth more strongly than expected.
A faster US expansion, supported by renewed inflation pressure, could force the Fed to hold rates higher or even hike. That would strengthen the dollar, push yields up and spur a broad risk-on rotation — inflicting a 5–20% drop in gold prices.
ETF outflows would follow, with the size of liquidation depending on how much of gold’s recent risk premium unwinds.
Still, the Council cautions that consumer buying in markets like India and China tends to rise as prices fall, providing a degree of natural support.
Wildcards: Central Banks and India’s Gold-Backed Loans
Two swing factors sit outside the WGC’s formal modelling: central-bank purchases and the behavior of recycled gold supply.
Emerging-market central banks still hold far less gold than developed markets, leaving significant room for further diversification if geopolitical risks flare. But a pullback toward pre-pandemic purchase levels would remove a key pillar of support.
Recycling is also unusually hard to predict. Despite record prices, global recycling has remained muted, partly because Indian households — the world’s biggest holders of physical gold — have pledged more than 200 tons of jewelry as collateral this year through the formal financial sector alone. Informal lending likely involves similar volumes.
A severe domestic or global slowdown could trigger forced liquidations of such collateral, temporarily boosting secondary supply and exerting downward pressure on prices.
“Surprises Will Return”
In its concluding assessment, the World Gold Council warns that 2026 may mirror 2025 in unpredictability. While the base case remains neutral, the balance of risks leans slightly positive given the fragile geopolitical landscape, high market valuations and persistent macro uncertainty.
“Shocks and surprises are increasingly the norm,” the report says. For investors, gold’s role as a diversifier and source of downside protection “remains as relevant as ever.”
