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Gold to consolidate after recent correction, but patience should be rewarded
Highlights: Gold entered 2026 at record highs before correcting sharply on Fed re-pricing. It softened through the Middle East conflict as rising energy prices and higher yields more than offset any safe-haven bid. Looking ahead, US yields remain the dominant driver of the gold price, with the US dollar playing a meaningful but secondary role. What’s most notable is gold’s positive correlation with global equities, meaning it is not functioning as a direct equity hedge at the moment. Beneath the surface, though, demand fundamentals remain robust: physical investment will likely overtake jewellery as the largest source of demand, central bank buying remains structurally elevated and ETF inflows seem to have resumed after a brief conflict-period dip. We believe these structural demand dynamics will ultimately reward patient investors.
- Our view: As energy-related pressures on rates ease, the headwinds facing gold should diminish, and we expect consolidation through Q3. As the US dollar settles into a range, investors actively seek diversifiers, and gold volatility declines, we expect the yellow metal to resume its uptrend towards the end of the year
- Investment implications: We keep our existing allocations to gold, and believe under-allocated portfolios may find the current range an attractive medium-term entry point. Gold’s role today is primarily a real-yield and macro hedge, rather than an equity hedge. Therefore, position sizing and implementation should reflect that