Gold experienced an exceptional year in 2025 – with more than 50 new record highs and a return of over 60%. According to the
Gold After Record Year 2025: Drivers and Influencing Factors
In 2025, gold was one of the best-performing asset classes globally. The World Gold Council attributes this strong performance to several concurrently acting factors:
- a “heightened” geopolitical and geoeconomic environment
- an overall weaker US dollar and slightly lower interest rates
- many investors’ search for diversification given weak bond yields and valuation concerns in equity markets
Both institutional investors and private investors increased their gold allocations, according to the report. In addition, central banks continued their gold purchases at a high level in 2025 – albeit slightly below the record levels of previous years, but still significantly above the long-term average.
The World Gold Council’s in-house Gold Return Attribution Model (GRAM) shows that the 2025 annual performance was relatively evenly supported by four factors:
- Risk & Uncertainty, primarily geopolitical in nature
- Opportunity costs, i.e., dollar development and interest rate levels
- Economic data (economic expansion)
- Momentum and investor positioning
Notably, all four factors contributed with similar strength. Thus, the market was not driven by a single issue, but by a broad mix of political, monetary, and market dynamics, according to the World Gold Council.
Gold 2026: Base Scenario and Alternative Development Paths
For 2026, the World Gold Council initially assumes that the current gold price essentially reflects market consensus expectations for growth, inflation, and monetary policy. In this base scenario (“Macro Consensus”), the gold price could tend to move sideways, i.e., within a range of moderate fluctuations around the current level.
However, the report outlines three alternative scenarios in which gold could deviate significantly from this framework:
“Shallow slip” – moderate downturn
In a scenario of a slight economic downturn (“shallow slip”), the US economy cools noticeably, risk appetite in the markets decreases, and investors increasingly shift to defensive assets.
In this environment, the US Federal Reserve could cut interest rates more aggressively than currently expected. Consequently, the US dollar would tend to weaken, and yields on longer-term bonds would fall.
According to the World Gold Council, this would generally be positive for gold: lower interest rates and a weaker dollar reduce the opportunity cost of holding gold. In this scenario, the WGC sees room for moderate further price increases, the magnitude of which is described in the report as approximately 5% to 15% – depending on the depth and pace of the downturn.
“Doom loop” – deep global downturn
The scenario of a synchronous global downturn, which the WGC refers to as a “doom loop,” is significantly more bullish for gold. Triggers would be rising geopolitical tensions, unresolved conflicts, or new hotbeds of crisis that burden confidence and willingness to invest worldwide.
Companies would then cut back on investments, households would restrict consumption, growth and inflation in the US would fall significantly, and the Fed would be forced into aggressive interest rate cuts. Consequently, long-term yields would fall sharply, and the dollar would weaken.
In this environment, the World Gold Council expects a pronounced flight-to-safety effect in favor of gold. According to this model calculation, the precious metal could gain approximately 15% to 30% over the course of 2026. The primary driver would be strong investment demand, particularly through exchange-traded gold funds (ETFs), which have already seen high inflows in the current bull market, but are still below previous peak phases in historical comparison.
“Reflation return” – strong growth, higher dollar
On the other hand is the scenario of high-growth reflation (“reflation return”). According to the WGC, this would be conceivable if economic policy measures by the Trump administration lead to significantly higher growth.
A stronger economy would lead to higher inflation expectations and possibly renewed Fed interest rate hikes. Long-term yields and the US dollar would rise, and risk assets such as equities would benefit, it was further stated.
For gold, this would be the weakest scenario: rising interest rates and a strong dollar increase opportunity costs, and demand for hedging decreases. In this scenario, the World Gold Council considers a noticeable price correction in the range of approximately 5% to 20% possible. Gold ETFs could experience sustained outflows, depending on how much of the “risk premium component” built into the gold price since 2022 is reduced.
Central Bank Purchases, Recycling, and Emerging Markets as Wildcards
In addition to the outlined macroeconomic development paths, the World Gold Council identifies several “wildcards” that could further influence the picture for 2026.
The focus here is on central bank gold demand. Central banks from emerging markets, in particular, have significantly increased their holdings in recent years. Nevertheless, the share of gold in the foreign exchange reserves of these countries remains significantly below the level of many industrialized nations.
With persistent or rising geopolitical tensions, these purchases could continue to increase and remain a structural support for the gold market.
Conversely, a decline in purchases to or below pre-COVID levels would represent a noticeable headwind for the gold price.
A second wildcard is the supply from recycling. Despite the significant price increase, global recycling volumes in 2025 were rather subdued, which the WGC explains, among other things, by the increasing use of gold jewelry as loan collateral – especially in India. There, according to World Gold Council estimates, more than 200 tonnes of gold-backed loans were issued through the formal financial sector alone.
If gold remains predominantly deposited as collateral rather than being sold, this acts as price support. However, in a severe global downturn, forced liquidations of such collateral could bring additional secondary supply to the market and dampen the price.
Outlook: Gold Remains a Barometer for Risk and Stability
The World Gold Council concludes that the gold outlook for 2026 is primarily shaped by one factor: persistent uncertainty. While the current gold price largely reflects market consensus and tends to indicate a sideways phase, the range of possible developments – from moderate gains to strong increases and even pullbacks – remains wide.
Regardless of the respective scenario, the report emphasizes that gold plays a role as a strategic diversifier and stability component in portfolios. Central banks, investment demand, recycling flows, and geopolitical developments can strengthen or temporarily weaken this role depending on the environment – however, the fundamental function of gold as a hedging instrument in phases of increased risk remains, in the view of the World Gold Council.
