The current rally reflects a clear shift from cyclical supply narratives towards a sustained geopolitical risk premium. The key question is whether this premium is transient or structural.
Does the geopolitical premium justify further upside in gold?
Yes, with important caveats.
Gold’s move above USD 4,600 is not driven by speculative excess alone. It is underpinned by four structural forces:
Persistent geopolitical fragmentation
Ongoing conflicts, sanctions risk, and great-power rivalry have increased demand for neutral reserve assets. This has lengthened the life of the geopolitical premium rather than creating a short-term spike.
Central bank accumulation
EM central banks continue to diversify away from USD assets. This demand is price-insensitive and provides a durable floor.
Fiscal dominance concerns
Elevated sovereign debt and political pressure on central banks raise long-term currency debasement risks, which gold prices in ahead of realised inflation.
Portfolio hedging behaviour
Gold is increasingly treated as strategic insurance rather than a tactical inflation trade.
However, upside from here is likely to be slower and more volatile, with pullbacks if geopolitical tensions temporarily de-escalate or real yields rise.
Preference for 2026: Gold, silver, or oil?
Gold: Structural core holding
Best risk-adjusted hedge against geopolitics, currency risk, and policy uncertainty. Returns may be more measured, but downside protection remains superior.
Silver: High-beta upside play
Offers greater upside if industrial demand accelerates via AI, electrification, and solar. However, it remains more cyclical and vulnerable to growth slowdowns. Suitable as a satellite position.
Oil: Tactical, not structural
Near-term upside is supported by geopolitics and options positioning, but longer-term demand uncertainty, energy transition pressure, and political intervention cap sustained appreciation.
Bottom line
For 2026, gold remains the most robust geopolitical asset, silver offers asymmetric upside for risk-tolerant investors, and oil is best approached tactically rather than as a long-duration hedge.
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