Why Gold’s 2025 Was Not the End of the Story

Gold in 2026: A Repricing of Monetary Confidence

Key Concepts:

• Dollarization/De-dollarization: The process of increasing or decreasing reliance on the US dollar in international trade and reserves.
• Fiat Currency: Government-issued currency that is not backed by a physical commodity like gold.
• Monetary Sovereignty: A nation’s control over its own monetary policy and currency.
• Strategic Allocation: Viewing gold not just as an investment, but as a crucial component of a long-term portfolio strategy for risk management.
• Regime Shift: A fundamental change in the factors influencing gold’s price, moving beyond traditional macroeconomic drivers.
• Fiscal Dominance: The influence of government spending and debt levels on monetary policy.
• Inelastic Supply: A situation where the supply of an asset (like gold) does not significantly increase in response to price increases.

---

I. 2025 Performance & The Core Question

Gold experienced an exceptional 2025, achieving over 50 all-time highs and a 60% calendar year return, outperforming equities, bonds, commodities, and cash. This raises the central question: will this performance continue into 2026? The analysis presented frames this not as a question of speculative excess, but as a potential shift in the underlying monetary landscape. The core debate is whether to take profits, assuming the move is over, or to recognize a deeper, structural change.

II. Official Frameworks vs. Underlying Trends

The World Gold Council’s attribution analysis indicates that 2025’s gains were broad-based, driven by growth, risk, uncertainty, opportunity cost, and momentum, with official sector activity acting as a structural force. Their valuation framework suggests a more rangebound outlook for 2026 under a “polite consensus” scenario – moderate growth, gradual rate cuts, a modestly weakening dollar, and manageable geopolitics. However, the analysis argues this base case relies on a level of trust in the fiat system that is increasingly absent.

III. The Rise of De-Dollarization & Monetary Sovereignty

The speaker highlights a subtle but significant trend: de-dollarization. This isn’t a dramatic collapse of the dollar, but a gradual erosion of its dominance. Countries are reassessing the security of holding US dollar assets after witnessing instances of reserve freezing and payment rail restrictions. This has led to a shift in incentives, prompting nations to seek monetary sovereignty through assets like gold, which operate outside the control of individual jurisdictions and aren’t subject to political weaponization. Central banks are buying gold not for trade, but as a form of insurance against political risk. At $4,000/ounce, achieving desired reserve allocations requires fewer tons of gold.

IV. The Decay of Fiat & Gold as a Hedge Against Political Management

The analysis posits that fiat currencies don’t “die” in a single event, but rather “decay” through repeated exceptions and emergency measures becoming normalized. Deficits become structural, and inflation is presented as an accident while policies effectively dilute currency. This results in a quiet erosion of purchasing power and increased reliance on confidence rather than collateral within the financial system. Consequently, gold is evolving from a hedge against inflation to a hedge against the political management of money itself. This represents a modern manifestation of the “death of fiat” – a prolonged period of currency name retention coupled with integrity loss.

V. Big Bank Research & the Regime Shift

Research from JP Morgan supports this view, noting a “rebasing higher” in gold prices driven by ongoing diversification from both official reserves and investors. They emphasize a flow framework, arguing that sustained demand from central banks and investors will continue to drive price increases. Saxo Bank goes further, asserting that gold has undergone a “regime shift.” Traditional macroeconomic factors (rising real yields, a strong dollar) have lost their predictive power due to the changing marginal buyer – official sector and Asian demand now absorb selling pressure that would have previously caused price declines. Price formation is no longer solely dictated by Western rates traders.

VI. The Broader Picture: Competing Standards & Building Backups

The de-dollarization trend isn’t about the dollar disappearing, but about it becoming less singular. More trade is settled outside the dollar, reserves are being diversified, and bilateral arrangements are reducing dependence on US-controlled financial rails. This is driven by inertia and network effects, but once incentives shift, the direction can persist. The world is moving from a single standard to competing standards – one based on dollar collateral and Western legal infrastructure, and another building redundancy with regional settlement and assets immune to sanctions. This explains gold’s increasing role as strategic insurance.

VII. Gold’s Evolving Role in Portfolios

Gold’s role in portfolios is shifting. It’s no longer solely viewed as a hedge against falling rates or market panics. Traditional diversifiers like bonds are becoming less reliable due to inflation and fiscal credibility concerns. Cash yields are vulnerable to policy-driven liquidity injections. Gold uniquely sits outside the credit system and the state’s promise structure. Therefore, focusing on the intact pressures driving gold is more valuable than obsessing over rangebound models.

VIII. Key Pressures Supporting Gold’s Price

Four key pressures are identified:

1. Official Sector Demand: Central banks are prioritizing assets that are difficult to freeze, default on, or devalue – a direct expression of de-dollarization.
2. Investor Diversification: Gold’s share of overall investor assets remains relatively small, leaving room for expansion. Modest allocation shifts can have significant price impacts due to inelastic supply.
3. Policy Credibility: Markets are asked to finance large deficits while assuming central bank independence and discipline, a proposition increasingly challenged by political pressure and fiscal dominance.
4. Geopolitical Risk: Rivalry, fragmentation, and sanctions risk are now structural features of the global system, driving demand for gold as strategic insurance.

IX. Potential Headwinds & Long-Term Outlook

While acknowledging potential corrections due to factors like reflation, stronger productivity, or technical flows, the analysis emphasizes that the underlying logic supporting gold’s price remains intact. Debt won’t disappear with temporary growth, political incentives won’t automatically favor restraint, and the fiat system won’t regain trust through rhetoric alone.

X. Conclusion: A Repricing of Monetary Confidence

The speaker concludes that gold is not in a bubble, but undergoing a repricing of monetary confidence. It’s responding to aggressive currency management and geopolitical risks as it historically has – signaling a questioning of the surrounding system. The question for 2026 isn’t whether gold will advance or retreat, but whether the existing system can restore trust without repeating past mistakes of debt, emergency measures, and denial. If not, 2025’s performance may be seen as the beginning of a long-overdue correction, rather than an isolated event.