World Gold Council: The market generally expects the rise in gold to continue, but uncertainty remains high

The Zhitong Finance App learned that on December 5, the World Gold Council published an article stating that gold performed excellently in 2025, reaching more than 50 record highs throughout the year, with a cumulative increase of more than 60%. This strong performance was driven by a combination of factors, including increased geopolitical and economic uncertainty, weakening of the US dollar, and continued upward momentum in gold prices. Looking ahead to 2026, although the market generally expects the current trend in the gold market to continue, macroeconomic data is fragmented under the serious influence of geo-economic factors, which also means that uncertainty will remain high. The association's analysis shows that factors such as slowing economic growth, monetary policy easing by major central banks, and ongoing geopolitical risks are more likely to support rather than weaken the price of gold.

Will the rise in gold prices continue or is it shifting to a pullback?

Gold performed well in 2025, reaching more than 50 record highs throughout the year, with a cumulative increase of more than 60%. This strong performance was driven by a combination of factors, including increased geopolitical and economic uncertainty, weakening of the US dollar, and continued upward momentum in gold prices. Investors and central banks in various economies are increasing their gold holdings in order to seek diversification and stability of assets.

Looking ahead to 2026, continued geo-economic uncertainty will continue to affect the outlook for the gold market. The price of gold generally reflects the market's consensus expectations on the macroeconomy. If the current environment remains unchanged, the price of gold may continue to fluctuate in the range. However, judging from this year's trends, it is likely that gold's performance in 2026 will once again be surprising. If economic growth slows down and interest rates decline further, gold may rise moderately; if rising global risks lead to a severe recession, gold may usher in strong gains. Conversely, if the Trump administration's policies achieve significant results, accelerate economic growth and reduce geopolitical risks, it will drive interest rates to rise and the dollar to strengthen, thereby putting pressure on the price of gold.

Other factors, such as the central bank's demand for gold purchases and the trend in the supply of recyclables, may also affect market dynamics. Most importantly, in the context of continued market fluctuations, gold's central role as a portfolio diversification tool and asset stabilizer remains critical.

Chart 1: Continued market fluctuations and geo-economic risks may drive up the price of gold, but risk premiums may fall or put pressure on gold

Implied gold performance in 2026 under hypothetical macroeconomic scenarios*

*Historical data is based on the LBMA midday gold price (USD) as of November 28, 2025. Range values are not price predictions, but rather hypothetical presentations of potential outcomes for different scenarios based on the Association's gold valuation framework. The macro-consensus scenario corresponds to fluctuations of -5% to 5%; the mild recession scenario corresponds to a 5% to 15% increase; the vicious cycle scenario corresponds to a 15% to 30% increase; and the re-inflation scenario corresponds to a 5% to 20% decline. The reference benchmark is the average LBMA gold price for November 2025.

Remarkable gains in gold

By the end of November, the price of gold had reached more than 50 record highs during the year, with a cumulative increase of more than 60%, making it one of the best-performing assets in 2025.

This historic rise is expected to set the record for the fourth highest annual increase in gold since 19712. The reason behind this is a combination of factors.

At the macro level, the following two major drivers are particularly critical: the geopolitical and geo-economic environment continues to be tense; the weakening dollar and a slight decline in interest rates on US bonds.

In a context where weak bond returns coexist with concerns about a stock market bubble, investors prefer diversified portfolios. In this context, the positive rise in gold prices itself has led to a significant increase in investment demand in various regions around the world. Meanwhile, the global central bank's gold buying boom continues. Although its demand level falls short of the peak of the past three years, it is still far above the historical average.

Chart 2: Gold outperformed the year-to-date performance of major assets in other major asset classes* in 2025

*Data as of November 28, 2025. Note: Although the actual return for gold during this period was 60.6%, for simplified presentation, the chart shows 60%.

The short-term gold price performance attribution model (GRAM) shows that high-risk environmental factors — mainly driven by geopolitical risks — contributed about 12 percentage points of gold's increase during the year; lower opportunity costs — achieved through a weaker dollar and a slight drop in interest rates — contributed an additional 10 percentage points of increase.

Among these two major factors, the combined effects of heightened geopolitical risks and the weakening dollar contributed about 16 percentage points, highlighting the significant impact of political and macroeconomic uncertainty on gold performance since Trump's second term.

Furthermore, the rise in price potential and investor positions contributed 9 percentage points, while economic growth factors contributed 10 percentage points.

Chart 3: Geopolitical risks, weakening US dollar, and inflows of investment capital are driving up the price of gold

The key drivers behind the monthly return of gold price*

*Data as of November 28, 2025. The short-term gold price performance attribution model (GRAM) is a multiple regression model for the monthly return of gold prices, which includes four key drivers of gold price performance: economic expansion, risk and uncertainty, opportunity costs, and trend momentum. The results here are based on an analysis of monthly data over a five-year period. Other estimation period and data frequency options are available at GoldHub.com.

It is worth noting that the distribution of contributions from the four major drivers of gold price performance this year is unusually balanced. This indicates that the current market is being driven by multiple forces rather than being dominated by a single factor. Despite this, the role of trend momentum factors is still more significant than in previous years — this is not surprising given that the strong rise in gold prices has attracted widespread attention from investors.

Table 1: Gold prices are basically driven by the balance of the four key drivers

Annual return contributions of key drivers behind gold price performance (%) *

*Data as of November 28, 2025. The total sum may not be equal due to rounding. The data is presented as a percentage and represents the proportion of each factor's contribution to gold's annual return. For more information on the Gold Price Performance Attribution Model (GRAM), please refer to Chart 3.

**Other factors not included in the model due to data availability, short-term effects, or analytical limitations.

2026 outlook

Looking ahead to 2026, although the market generally expects the current trend in the gold market to continue, macroeconomic data is fragmented under the serious influence of geo-economic factors, which also means that uncertainty will remain high. Investors' concerns about the weakening of the US labor market are growing, while the debate over whether inflation remains stubbornly high or faces upward pressure again continues. Meanwhile, despite some progress, global geopolitical frictions are secretly heating up.

What does this mean for gold? Similar to this year's situation, unexpected events such as “Freedom Day” are still difficult to predict. However, although the nature of specific events cannot be predicted, the frequency of tail risk events is increasing. Such events will trigger an improvement in investment risk appetite or a rise in risk aversion, and may have a decisive impact on the performance of various types of assets. At the same time, they will also influence the role of gold as a strategic investment portfolio diversification tool.

Uncertainties

In addition to the above scenario, the central bank's demand for gold purchases and the supply of recyclables are two key variables. For a number of reasons, these factors are not included in our traditional quantitative models, but they may still have a substantial impact on the gold market.

The central bank's demand for gold purchases remains an important support for gold's performance. Global official sector gold purchases have remained strong, and there are good reasons to believe that the central bank's gold buying trend will continue.

Chart 7: The share of gold reserves in emerging markets is still far lower than that of developed economies

Gold as a share of total foreign exchange reserves*

*Based on International Monetary Fund aggregated data as of September 30, 2025.

Emerging markets are the main purchasers of gold, and their share of gold reserves is still far lower than that of developed countries and regions. If geopolitical tension escalates, the pace of gold purchases in emerging markets is expected to accelerate, thereby strengthening the structural support for gold.

Chart 8: Central bank demand has always been an important driver of gold's performance

The central bank's actual and estimated annual demand*

*Data is as of the third quarter of 2025. The blue dotted bar represents the Association's estimate of 750 to 900 tons of central bank gold purchases for the full year of 2025. The 2026 purple dotted bar indicates a broad forecast range, which will depend on macro and policy drivers.

However, the central bank's decision to buy funds usually depends more on policy considerations than on simple market conditions. If the purchase volume falls significantly back to pre-pandemic levels or even lower, it could put additional resistance on gold.

Recoveries can also be a significant disruptor. Due to factors such as rising gold prices and economic performance, the supply of recycled gold has been relatively low this year. This phenomenon is related to a significant increase in the use of gold as collateral for loans.

In India alone, more than 200 tons of gold jewellery were secured through formal channels this year (Chart 9). Moreover, unofficial sources suggest that the size of gold mortgages from informal channels may be comparable.

If the supply of recycled gold remains sluggish — relatively replaced by gold collateral, this trend is expected to continue to support the price of gold. However, if India's economy slows significantly, it may cause gold collateral to be liquidated and sold off, thereby increasing supply in the secondary market and suppressing the price of gold. Although the market is generally optimistic about India's economic prospects, a severe global recession (such as a “vicious circle” scenario) may still have spillover effects and affect the Indian market.

Chart 9: The size of gold mortgages continues to grow

Estimate India's quarterly jewellery collateral volume and global quarterly recyclables supply*

*As of September 30, 2025. According to data from the Reserve Bank of India, the amount of gold collateral between Indian banks and non-bank financial institutions was estimated.

Conclusions

The outlook for the gold market in 2026 is being shaped by the economic uncertainty investors are currently facing. Similar to 2025, financial markets may once again experience significant fluctuations in the coming year.

Although the current price of gold largely reflects mainstream macroeconomic expectations, indicating that it may show range-bound fluctuations, the Association's analysis shows that factors such as slowing economic growth, easing monetary policies by major central banks, and ongoing geopolitical risks are more likely to support rather than weaken the price of gold.

Furthermore, demand for gold investment, which is critical to this year's gold price performance, still has room to grow in the future.

Even if a bearish scenario is likely to occur, investors can still expect to maintain a certain gold allocation in the current situation where geo-economic dynamics are difficult to predict.

In addition to investment demand, the central bank's demand for capital purchases and recovery funds will also provide additional support, but it may also turn into resistance under certain conditions.

At the end of the day, the coexistence of multiple possibilities highlights the value of scenario planning. In a world where shocks and surprises are becoming more common, gold's role in providing asset diversification and downside risk protection remains critical.