Investors hopeful that 2026 would bring calm to markets have been disappointed. We’re only one month into the year, and already markets seem to have super-cycled several times.
Key factors influencing today’s gold price
The dollar has been a dominant theme – as has its perceived counterweight, gold. While the dollar’s decline pre-dates Donald Trump taking office in January 2025, his actions have certainly accelerated its devaluing. As we called out in our 2026 outlook, the world’s reserve currency has had stiff competition over the past year as the preferred store of wealth.
Global central banks have increasingly favoured gold over the US dollar. Certain nations will have observed the threat of Russia having its USD assets seized by global players supportive of Ukraine and subsequently considered the metal a more attractive neutral reserve. Others may simply want to diversify away from their dependence on the dollar.
Goldman Sachs estimates that central banks will target around 20% of reserves in the precious metal, while China currently sits around 8%. This creates systemic tailwinds for the gold price. Trump’s erratic approach to tariffs and global diplomacy has only added to this momentum. His comments just last month that dollar weakness was “great” sent the currency to a four-year low, while the gold price in turn hit an all-time high above $5,500 an ounce.
What today’s gold price means for investors
It is the law of market gravity, however, that what goes up – at such a rapid pace – must come down. And so it was that when rumours hit the market that Trump had chosen rate hawk Kevin Warsh as his nominee for the new Fed chair, those positions unwound, fast. The dollar jumped, gold fell considerably, and investors felt bruised.
The market read Warsh’s nomination as a sign of rate stability – and potentially a higher for longer stance on interest rates, based on his previous voting record. We consider his recent rhetoric to be more informative. He has spoken publicly against current levels, saying that rates should be lower, a view more in tune with Trump’s beliefs, hence the nomination.
Regardless of the US rate outlook, the whipsaw in markets is a lesson to all that past performance cannot be relied upon to predict future returns, and that volatile markets are rarely fun to play in.
That is not to say there aren’t gains to be made, momentum is with markets. An extraordinary 85% of global stock markets finished January at new monthly highs, marking the most diverse participation in three decades. Data from JPMorgan suggests that more companies are upping their forward guidance for 2026, indicating US business leaders are feeling more optimistic about the year ahead than they were previously, and the dominance of big tech is broadening out – though there are no guarantees.
How geopolitical events are affecting gold prices
Unpredictable markets are likely to continue through the year ahead. Ongoing tensions in the Middle East, the Russia-Ukraine war and the US Mid Term elections all present potential inflection points for asset prices.
Investors should therefore remain mindful of valuations and volatility. Those looking for investment ideas as we approach tax year end should also remember that a well-diversified and tactical investment approach is increasingly important. We think that fixed income funds and emerging markets offer opportunities, as does the much-beleaguered quality-style of investing, which has been overlooked and undervalued. Quality stocks, with stable, predictable cashflows and little to no debt, have characteristics which should do well regardless of economic backdrop. These are particularly needed in times of uncertainty.
Where gold prices could go next
Where does gold go from here? There are systemic tailwinds, as discussed above, the perceived safe haven appeal of gold in times of uncertainty remains, especially whilst global diplomacy is conducted via social media. We don’t expect the sharp rally of recent history to be repeated or sustained, but we do think that gold has an important role to play in portfolios this year, though diversification remains key.