Gold’s rally has further to run, but returns are set to moderate in 2026
NEW YORK (January 5) Gold’s surge to fresh record highs in the last few days of 2025 underscores a market that remains structurally supported and headed higher through the new year, even if gains are limited, according to one market strategist.
Aakash Doshi, head of gold strategy at State Street Investment Management, noted that in 2025, gold saw its strongest annual performance since 1979. While he remains bullish on the yellow metal, he said his base case for 2026 calls for high single-digit to low double-digit gains, with prices potentially targeting the $4,500–$4,600 range.
More importantly, he argues that the next major directional move still favors the upside.
“I think it’s far more likely that the next 20–25% move is toward $5,000 than back to $3,000,” Doshi said, noting that downside risks appear limited by strong structural support near the $3,600–$3,700 level.
Debt, yields, and gold’s evolving hedge role
One of the most powerful tailwinds for gold remains the unprecedented expansion in global debt. Total global liabilities now stand near $340 trillion, with government debt accounting for more than 30% of that total. As inflation proves stubborn and long-term yields remain elevated, Doshi sees gold increasingly functioning as a hedge against duration risk and currency debasement.
Traditionally, higher bond yields are negative for gold because they increase the opportunity cost of holding a non-yielding asset; however, Doshi said investors need to understand the new key driver in the bond market. He explained that an increase in yields driven by strong growth can weigh on gold, but yields pushed higher by inflation and fiscal excess could prove to be a tailwind for the precious metal. The latter scenario has contributed to a steepening yield curve and reinforced gold’s appeal in portfolios.
Doshi added that another supportive factor for gold is persistent positive stock-bond correlations. After decades in which bonds reliably offset equity risk, that relationship has broken down during the post-pandemic inflation shock.
“If stock-bond correlations don’t revert to their old inverse relationship, gold becomes more important in portfolio construction,” Doshi said, adding that investors are increasingly questioning the durability of traditional 60/40 allocations.
ETF flows show gold is not overowned
Central bank demand has been a key pillar of support for gold over the last three years; however, since the second half of last year, investment demand has been the main driving force in the global market.
While December’s data have not yet been finalized, as of November, figures from the World Gold Council show that more than 700 tonnes of gold flowed into global gold-backed exchange-traded funds (ETFs) in 2025. Specifically, the world’s largest gold-backed ETF, SPDR Gold Shares, saw its gold holdings increase by 195.75 tonnes.
Doshi noted that while the unprecedented rise in gold prices last year pushed the value of ETF assets to record highs, in tonnage terms, holdings are still below the highs seen in 2020. He added that, for this reason, there is still plenty of room for demand to grow.
“Gold can be overbought without being overowned,” he said. “There are still many institutional investors with zero allocation to gold.”
He noted that globally, gold ETFs still represent less than 3% of total ETF assets—well below the 5–10% allocation commonly recommended in strategic portfolios and far beneath the more than 8% share seen during the 2011 peak.
What is gold’s biggest risk in 2026?
Doshi explained that the most credible downside scenario for gold would involve a sharp rebound in U.S. growth that strengthens the dollar and reduces expectations for Federal Reserve rate cuts. In such an environment, ETF inflows could slow, and prices could drift back below $4,000.
He added that another risk is demand elasticity in Asia. Sustained prices above $4,000 may eventually weigh on consumer buying in China and India, though evidence of that slowdown has yet to materialize. A third, less likely risk would be a meaningful reversal in geopolitical fragmentation or a return to a more stable global trade regime, he said.
Even in these scenarios, Doshi said he doesn’t envision a collapse. “I think $3,000 is the new $2,000,” he said, arguing that elevated debt burdens and fiscal pressures have permanently lifted gold’s long-term price floor.
