Gold still attractive in an uncertain world

One important driver for gold is uncertainty in the global economy. The conflict in the Middle East has pushed energy prices higher. This tends to lead to higher inflation, while economic growth may slow. As a result, interest rates tend to rise and the dollar becomes stronger, as investors move into the dollar as a safe haven in times of uncertainty. Both developments can weigh on gold in the short term. Higher interest rates make gold less attractive as it does not pay interest like savings accounts or government bonds. At the same time, a stronger US dollar reflects increased demand for safety, which can reduce the need for alternative safe-haven assets such as gold.

Over the longer term, the same environment can actually be positive for gold. If higher inflation starts to weigh on economic growth, governments and central banks often take measures to support growth, for example by lowering interest rates, loosening financial conditions or providing fiscal support. And in times of uncertainty, gold tends to become more attractive due to its role as a portfolio diversifier.

Central banks also play an important role. Earlier this year, some investors worried that central banks might start selling gold, particularly after reports about Turkey. Following the outbreak of the war in Iran, Turkey’s central bank sold around 60 tonnes of gold, worth more than USD 8 billion, in a short period of time. However, this appears to have been an exceptional case as central banks as a group continue to buy gold. They do so to reduce dependence on other currencies and to spread risks. Central banks think mainly in the long term, and gold sales are therefore usually temporary rather than structural.

After the price decline early in 2026, many investors reduced their gold positions. In particular, gold ETFs in Europe and the US were sold by retail investors, because these tend to respond quickly to changes in market sentiment and concerns about rising interest rates.

China is different. Demand for gold remains strong there. Gold prices in China are often higher than global prices, showing strong demand. New regulations and savings plans are encouraging more Chinese individuals and institutions to invest in gold. China is therefore very important for the gold market. Both private individuals and large investors are buying more gold. Trading on the Chinese gold exchange is increasing, and gold can be imported easily. This helps prevent sharp declines in the gold price.

Developments in the Middle East mainly affect gold through short term market reactions. If tensions persist or escalate, gold prices are likely to remain volatile. Over the medium to longer term, however, the outlook stays positive. Persistent geopolitical stress raises stagflation risks and strengthens strategic demand from central banks and long term investors, supporting the case for new highs over time. If tensions ease, gold could see near term consolidation or a pullback as safe haven demand fades and real rates regain influence. Even then, easing tensions does not undermine the structural bull case for gold, as diversification needs and macro uncertainty remain. Overall, we see short term weakness in either scenario as tactical noise, with pullbacks providing opportunities to build longer term gold positions.

For the rest of 2026, we expect the gold price to continue fluctuating at first. This is due to uncertainty about inflation, geopolitics, interest rates and economic data. In the medium term, the outlook is positive. Many investors still hold little gold in their portfolios, geopolitical tensions remain high, and there are concerns about high national debt and a lack of confidence in economic policy, particularly in the US. For these reasons, gold remains attractive as a diversifier in the portfolio. The quick gains may be behind us, but gold will remain an important and attractive long term investment in 2026.

Jan Wirken
Equity Research & Advisory Expert