Gold Continues to Shine in 2026 Despite the Largest Surge in Nearly Half a Century

SadaNews - After one of the most explosive surges in modern market history, few investors expect gold to replicate the same performance in 2026. However, many top fund managers continue to bet on ongoing gains, arguing that the factors driving the precious metal to record levels remain in place.

Gold jumped by 65% in 2025 – its strongest performance in nearly half a century – as it attracted individual and institutional investors alongside central banks. In a year where almost all supportive factors for the metal converged, from declining interest rates to geopolitical tensions, gold even managed to break the inflation-adjusted record level that stood since 1980.

Bloomberg spoke to more than a dozen fund managers, whose firms collectively manage trillions of dollars in assets, to forecast the trend after this historic year. Most said they preferred not to significantly reduce their positions, maintaining their conviction in gold's long-term appeal.

"We still expect gold to rise in 2026, as the factors supporting its strong rise remain in place," said Ian Sampson, portfolio manager at Fidelity International. He added that he had reduced part of his positions during the frenzied rise in October but later increased them again, citing central bank purchases, declining interest rates, and high fiscal deficits as supportive factors.

Shaken Confidence in Major Currencies

Other investors pointed to a weakened confidence in major currencies in advanced economies – due to pressures on central bank independence and rising government debts – as one of the key supports for gold. Public debt inflation fueled political disputes throughout the year, from the standoff in the U.S. Congress to the shutdown in France, and the scrutiny of Japan's historical budget under its new leadership.

Mike Wilson, chief investment strategist at Morgan Stanley, said: "Gold has essentially become a bet against fiat currencies more than anything else." This view gained momentum during the last months of 2025, with the so-called "debasement trade," as influential investors like Ken Griffin and Ray Dalio viewed rising gold prices as a warning signal.

Wilson advises allocating 20% of portfolios to real assets, including gold, as a hedge against inflation, instead of the traditional 40 and 60 split between stocks and bonds, thus becoming 20, 20, and 60. He noted that the narrative of "currency devaluation" has become mainstream.

He added: "When everyone understands this story, you have to ask yourself: Is it fully priced in? I don't think so. Simply because I don't see a change in behavior yet. I don't see financial discipline anywhere in the world. In fact, I see the opposite."

Expectations for a Slight Gold Increase by Year-End

Darwi Kung, head of commodities and portfolio manager at DWS Group, stated that his firm maintains a slightly larger allocation than usual for gold-related investments and expects to continue this trend in 2026.

Kung believes prices will rise slightly by year-end, but he also expects short-term trading opportunities resulting from gold volatility with broader market fluctuations.

Massimiliano Castelli of UBS Asset Management mentioned that pension and insurance funds have shown increasing interest in gold during 2025, with some entities that had not previously invested in it allocating about 5% of their portfolios to it, attracted by strong returns and gold's ability to hedge risks in other portfolio areas.

He added: "Of course, we do not expect the same upside potential we saw last year, when gold was the best-performing asset class ever. But we remain optimistic."

A Historical Warning Signal Regarding Gold Performance

However, history offers a warning signal: massive surges are often followed by extended periods of weak performance. Gold hit a record level of $1921 per ounce in 2011, but it took nine years to return to that level. Similarly, after its 127% rise in 1979, it experienced a prolonged bear market.

Nevertheless, gold is still held in minimal amounts by U.S. investors. According to a Goldman Sachs analysis released in December, gold ETFs constitute only 0.17% of individual financial portfolios in the United States – six basis points lower than the peak in 2012. Goldman estimates that every 0.01% increase in this share drives the gold price up by 1.4%.

Central Bank Purchases as a Key Driver for the Yellow Metal

Central bank purchases are expected to remain the largest supportive drivers for rising prices, as Goldman Sachs anticipates a monthly purchase rate of 80 tons during 2026. Central bank purchases have surged since 2022 after the freeze on Russian reserves, increasing gold's appeal as an asset that cannot be seized.

Thomas Roderick, portfolio manager at hedge fund Trium Capital, stated that gold is one of the few assets that allows investors to build "liquid wealth outside American influence." He explained that even though he reduced his positions slightly since October, he still maintains a "good level of risk" in gold.

Roderick believes that China's accumulation of gold, in particular, is at the core of his optimistic outlook, given Beijing's desire to invest its huge trade surplus returns in assets protected from U.S. intervention. He said that China will not say: "Gold is high; let's buy more U.S. bonds.. that doesn't align with its geopolitical logic."

Central banks rarely sell their holdings, making their demand a stable source of price support. However, while monetary institutions may have sparked the rise in gold prices, swift inflows from institutional and individual investors in the latter half of last year played a significant role in boosting the rally.

According to Chanel Ramji from Pictet Asset Management, the more gold is owned by speculative investors, the higher its correlation with other high-risk assets.

Still, Ramji currently maintains a significant allocation of 8% to gold, having reduced his positions during the increase of speculative activities in October, then increased them again in December as more fast money exited the market.

He said: "Under these circumstances, where most purchases come from major central banks, we feel increasingly comfortable maintaining a higher weight of gold in portfolios." He added: "We expect gold to move upward this year, but at a more cautious and stable pace."