Gold and the wider precious metals complex have been the standout performers of 2025. They have also had a strong start to 2026, with geopolitics and a decline in US institutional credibility as well as central bank independence dominating investors’ asset allocation decisions.
It is always tempting to use historical parallels to contextualise current events and predict what will happen next, but there is no clear analogy to draw from the US’ own history. In a geopolitical sense, the current situation seems to blend aspects of the UK’s post-war and post-Suez decline, where the UK retrenched from imperial overreach, eventually culminating with its own strategic autonomy becoming highly constrained by domestic and international pressure.
US recalibrating away from Europe
One could argue that the US is undergoing a similar recalibration away from Europe and the Far East, and towards its own hemisphere. In this context, gold serves as an asset that is more independent of jurisdiction and less likely to be weaponised for geopolitical purposes. On the other hand, the conflict between the administration and its independent central bank reflects a recurring experience for Latin American governments, ultimately leading to a trifecta of currency and bond market weakness as capital flight accelerated. In both scenarios, gold performed strongly in local currency terms until aggressive policy stances reasserted credibility to the market. When a treasury and central bank start to move in lockstep supporting populist measures, the inflation flywheel often starts to accelerate. This is exactly the risk that the gold market has been responding to.
On a short-term, view week by week, market focus continues to hinge on parsing where the make America great again (MAGA) movement’s ire will be directed next. Earlier this month, risk markets breathed a sigh of relief following Trump’s speech at the World Economic Forum (WEF), where he eschewed using military force to annex Greenland (or briefly Iceland), causing the gold and silver price climb to pause before reaccelerating to the upside following Trump’s threats to place 100% tariffs on Canadian imports. In this context, the question for investors is: to what degree are gold price movements ‘front-running’ policy pronouncements that have yet to actually hit the real economy?
Gold reacts to fluctuations in ‘tail risk’
In this regard, gold frequently anticipates trends and reacts more to fluctuations in ‘tail risk’ than ‘baseline risk’. To see this principle in action, we don’t need to look very far in the past. During the early 2010s, gold had all the arguments in its favour. The global financial crisis was bookended by the emergence of the euro area crisis.
However, gold peaked relatively early in mid-2011, even though the worst impact on the European economy – and the sell-off in the euro – was yet to come and even accelerated sharply in 2012 and 2013, when growth really started to crater and unemployment surged. What the gold market detected early was that even though the fundamentals were worsening, the tail risk of governments being firmly behind the curve had receded. This was because the medicine of fiscal reforms and monetary support had started to be administered and was slowly working its way through the system.
Looking forward, the bigger issue for 2026 and gold markets will be what comes next for the administration. As approval ratings continue to plunge and the midterm elections indicate a potential wipe-out, questions remain about how and which other players will seek to gain control. A reassertion of the Republican establishment is likely to drive de-escalation vis-à-vis tariffs, international relations, stabilisation in the dollar, and pressuring gold.
Positive drivers for gold to remain in place
However, the balkanisation of Trump’s inner circle means populist operators are emboldened to stay the course and further entrench the America first doctrine, keeping positive drivers for gold firmly in place. What this balkanisation has meant in practice – which is again a highly unique aspect of the current administration – is that information flows from the US government – either official or in the form of leaks – have become increasingly opaque and hard to parse.
Comparing the US intervention in Venezuela to remove Nicolás Maduro with the toppling of Saddam Hussein in 2003 reveals striking differences in communication. During the US invasion of Iraq, the US National Security Council consistently produced strategic communications, resulting in intense public debates and periodic leaks of intelligence.
However, regarding Venezuela, the Trump administration not only bypassed congress but also has articulated very little in terms of the wider strategic goal, with analysts instead left to rely on social media posts and off-the-cuff interview soundbites. This lack of clarity also leaves the broader strategic direction highly open to interpretation and further inculcates a sense of fatter tail risk than prior administrations.
What all of the above leaves us with is a world in which US bond markets have become less like safe-haven assets and more like assets which are contingent on political de-escalation, with gold serving as a release valve for capital looking to be insulated from being weaponised in whatever battle the US administration becomes embroiled in next.
By George Cotton, commodities portfolio manager at J. Safra Sarasin Sustainable Asset Management
