The World Gold Council (WGC) says gold has experienced a remarkable year, achieving more than 50 all-time high prices and emerging as one of the strongest-performing assets in respect of returns.

It explains that gold’s historic rally was driven by a supercharged geopolitical and geo-economic environment, as well as generalised dollar weakness and marginally lower rates.

These factors have resulted in a broader push for portfolio diversification amid lacklustre bond returns and concerns of “frothiness” in equity markets. The WGC adds that gold’s momentum was driven by diverse forces this year, rather than a single catalyst.

The council points out that both investment demand and central bank buying for gold surged this year, with gold delivering returns of 60%, compared with equity market stocks at about 30%.

Looking ahead to 2026, the WGC says markets are largely pricing in a continuation of the status quo, but divergences in macro data laden with a heavy geo-economic blanket mean that uncertainty will remain high.

Concerns about a softening US labour market are also mounting, while debates persist over whether inflation will stay stubbornly high or face renewed upward pressure.

“Simultaneously, and despite some progress, geopolitical frictions continue to simmer,” the council notes.

While unforeseen events such as Liberation Day in the US are impossible to anticipate, the frequency of tail risk events is on the rise.

The WGC outlines three possible scenarios for gold next year, one which could push gold moderately higher, one that could push gold significantly higher and one which could prompt a notable pullback.

In the first scenario, the WGC says a combination of lower interest rates and a weaker dollar, paired with heightened risk aversion, would create a continued supportive environment for gold – whereby prices could rise by between 5% and 15% compared with current levels.

The rise in the gold price would largely depend on the severity of the economic slowdowns globally and the speed and magnitude of US rate cuts.

In the second scenario, the WGC says, there is a small chance that the global economy moves into a deeper and more synchronised slowdown, driven by rising geopolitical and geo-economic risk. 

Tensions around trade, unresolved regional conflicts or a new flashpoint may erode confidence and weigh heavily on global activity, it explains.

These pressures would contribute to a more fragmented global environment and heighten risk sensitivity across trade and investment. If the US growth rate weakens further, and inflation falls below target, the Federal Reserve will cut rates aggressively.

The combination of these factors could create an exceptionally strong tailwind for gold, supporting a price increase of 15% to 30% next year, compared with current levels.

In this scenario, investment demand will remain a key driver for the commodity, offsetting weakness in other areas of the market such as jewellery or technology.

Global gold exchange-traded funds (ETFs) have seen $77-billion of inflows this year, adding more than 700 t to their holdings, which, compared with previous gold bull cycles, leaves ample room for growth.

However, in the WGC’s third scenario, there is a possibility that the policies set by the US administration succeed and result in stronger-than-expected growth linked to fiscal induced support.

Under these conditions, reflation likely takes hold, pushing activity higher and lifting global growth toward a firmer trajectory.

As inflation pressures mount, the Federal Reserve would be forced to hold or even hike rates in 2026.

This, in turn, would push long-term yields higher and strengthen the dollar.

Ultimately rising yields, a stronger dollar and a shift toward risk-on positioning could weigh heavily on gold – prompting a notable withdrawal of investor interest.

With hedges unwound and retail demand softening in this scenario, the gold price could reduce by between 5% and 20% compared with current levels.

Gold ETF holdings could see sustained outflows as investors rotate into equities and higher-yielding assets; however, opportunistic buying from consumers and long-term investors could act as a buffer in this kind of environment.

Beyond the scenarios, central bank demand and recycling supply are notable wild cards for gold next year. There are, however, good reasons to expect central bank buying to continue.

Recycling, in turn, has been relatively muted this year, the WGC says. “A marked economic slowdown in India could trigger forced liquidations of gold-backed collateral, which will boost secondary supply and add pressure to gold prices.”

The council ultimately expects gold to continue to be defined by the uncertain economic environment that investors currently face, with 2026 poised to bring more volatility across financial markets.

Despite the plausibility of a bearing scenario, it is likely that investors will maintain some exposure to gold given the unpredictability of current geo-economic dynamics.

“In a world where shocks and surprises are increasingly the norm, gold’s capacity to provide diversification and downside protection remains as relevant as ever.”