Gold Price Momentum Increases Amid Geopolitical Headwinds

Why It Matters

The surge underscores gold’s reinforced role as a safe‑haven asset amid geopolitical tension and US policy uncertainty, shaping portfolio strategies for investors and central banks alike.

Key Takeaways

• Gold price forecast to hit $4,920/oz, up 43% YoY.
• Physical investment in gold coins and bars outpaces jewellery demand.
• Mine production to rise 2.4% to 3,907t, despite higher costs.
• Central‑bank purchases fell 22% to 848t, a four‑year low.
• Recycling expected to grow 5.1% as scrap supply rebounds.

Pulse Analysis

Gold’s price momentum reflects a confluence of macro‑economic stressors that have revived its safe‑haven appeal. With the Middle East conflict and lingering US fiscal uncertainty, investors are flocking to tangible assets, driving a projected 43% price increase to $4,920 per ounce—its highest annual average on record. This rally eclipses the 44% gain seen in 2025, marking the strongest performance since the 1980s and reinforcing gold’s status as a hedge against currency volatility and inflationary pressures.

Demand dynamics are shifting dramatically. While jewellery consumption contracts 19% due to price‑induced light‑weighting and substitution, physical investment in coins and bars is expanding, now representing the largest demand segment for the first time. Central‑bank purchases, though down 22% to a four‑year low of 848 tonnes, remain above pre‑2022 levels, indicating continued strategic interest. On the supply side, global mine output is set to climb 2.4% to 3,907 tonnes, but rising all‑in sustaining costs—up 12% to $1,552 per ounce—compress margins. Recycling offers a counterbalance, with scrap supply projected to rise 5.1% as high prices incentivize recovery, pushing total supply growth despite tighter mining economics.

For investors, the outlook suggests sustained upside potential but also heightened volatility. Continued geopolitical turbulence, oil price spikes, and persistent US policy ambiguity could further elevate gold’s allure, yet cost pressures on producers and potential demand fatigue in the retail sector pose risks. Portfolio managers may consider increasing allocation to physical gold or exchange‑traded products to capture safe‑haven benefits while monitoring central‑bank activity and recycling trends as leading indicators of market direction.