Written by: John Kratochwil | AGF Investments
The remarkable surge in the price of gold may have caught many market-watchers by surprise and raised the eyebrows of skeptics, but even after a 90%-plus performance over the past year, there is reason to believe the tailwinds will continue. While U.S. President Trump’s nomination of Kevin Warsh as the next U.S. Federal Reserve Chair has created heightened volatility in recent days, structural demand from central banks, persistent geopolitical risk premia, and the return of ETF inflows since mid 2025 together keep the balance of risks tilted to the upside for gold into 2026. With mine supply slow to respond and new non traditional buyers emerging, pullbacks may remain relatively shallow versus underlying demand.
1. Geopolitics: The “fear premium” remains embedded.
The World Bank’s October 2025 Commodity Markets Outlook projects precious metals prices to remain elevated in 2026 following an unusually large, investment‑driven rally in 2025. That forecast sits within a backdrop of subdued global growth, elevated policy uncertainty and periodic geopolitical flare‑ups—conditions that historically support safe‑haven allocation. The World Bank’s commentary highlights precious metals as outliers versus broadly softer energy and agricultural complexes, which is consistent with gold’s role as a portfolio hedge when macro and geopolitical risks are hard to price.
2. Central banks: Steady buyers.
According to the World Gold Council (WGC), net official sector purchases exceeded 1,000 tonnes in each of 2022, 2023 and 2024—an unprecedented three year stretch in modern data that tightened available float. The 2024 total was ~1,045t, extending a 15 year net buying trend. Survey work from WGC in 2024 also showed that respondents expected the global gold share in reserves to be higher five years out.
3. Reserve composition: Gold’s share doubled in a decade.
International Monetary Fund data show gold’s share of international reserves reached about 18.3% in 2024, versus single digit levels in the mid 2010s. In parallel, several trackers noted that by late 2025, foreign central banks’ gold holdings (by value/share) had overtaken their U.S. Treasury holdings for the first time since 1996—a symbolic crossover that underscores diversification away from U.S. dollar denominated securities even as the greenback remains dominant.
4. ETFs: Multi-year outflow to powerful 2025 build.
After multi year outflows, physically backed ETFs pivoted to sustained inflows through 2025, culminating in the strongest calendar year on record. By December 2025, global ETF holdings reached roughly 4,025 tonnes and AUM hit successive peaks; inflows persisted into late year updates. This shift restored a Western investment pillar that had been absent during the 2021–23 period and materially supplemented official sector demand.
5. The Tether factor: a new “shadow central bank.”
Sell side analyses and financial media reported that Tether, a crypto token pegged to gold, accumulated about 116 tonnes of physical gold by late 2025—nearly two percent of quarterly global demand at the time—while also taking a large strategic stake path (rising from ~38% toward a controlling position) in the Canadian gold royalty company Elemental Altus Royalties. Measured against global central banks, this would put Tether at No. 38—ahead of Qatar and Greece. This crypto native, largely balance sheet driven buyer adds a non traditional demand channel for bullion and royalty exposure, potentially tightening available float during periods of momentum.
6. Street price assumptions: Houses moved higher into early 2026.
Major banks’ gold decks and target scenarios were revised up into late 2025 and early 2026, with a common thread that diversification demand (official and private) can persist even as policy rates ease, given supply inelasticity and policy uncertainty. The WGC’s quarterly and monthly flow work-lines echo that investor participation broadened in 2025, aligning with a higher price anchor into 2026 in baseline or downside growth scenarios. While individual target numbers vary by house and date, the direction of travel—institutional upgrades and scenario ranges shifting higher—has been clear across multiple publications.
7. Scarcity analysis: Above-ground stock versus the remaining frontier.
U.S. Geological Survey and WGC data situate the above‑ground gold stock at roughly 216,000+ tonnes, the cumulative result of millennia of mining, with a large share in jewelry and official holdings that are not frictionlessly liquid. Meanwhile, economically recoverable reserves are estimated at around 64,000 tonnes. Even with price support, bringing new supply online is slow: mine development commonly spans many years, and permitting and grade trends add friction. In short, supply is structurally inelastic at cycle‑relevant horizons, which magnifies the price impact of shifts in investment or official‑sector demand.
Given these seven factors, our bias to the upside for gold remains appropriate. Heading into 2026, the thesis rests on multiple reinforcing pillars: central banks sustaining multi‑year net buying; reserve managers’ gradual reweighting toward bullion; ETFs restoring a strong Western bid, and the emergence of new buyers like Tether that operate outside traditional commodity‑cycle playbooks. Layer on a macro environment characterized by slower growth, policy uncertainty and episodic geopolitical risk, and the case for continued momentum remains intact. With supply growth constrained and inventories effectively “sticky,” realized price volatility is likely, but the underlying set‑up still skews positive in the base case.
Related: Owning Gold the RIGHT Way