Why Gold Is Back in the Spotlight. And What It Means for Your Portfolio

Gold is having a moment. After years of trading in relative obscurity, the yellow metal has roared back into mainstream financial conversation, hitting record or near-record prices throughout 2024 and into early 2026. But this isn't just another speculative bubble or momentum trade. Something more fundamental has shifted.

The Numbers Tell the Story

The World Gold Council reports that 2024 saw record gold demand of 4,974 tonnes, the highest ever recorded. What's remarkable isn't just the volume, but where it's coming from. Central banks purchased over 1,000 tonnes for the third consecutive year, more than double their average buying from 2015–2019. The World Bank describes this as an "uncertainty bid," with official-sector institutions treating gold less like a tactical trade and more like a strategic reserve asset.

Six Forces Driving Gold Higher

1. Central Banks Are Accumulating at Historic Rates

This is the foundation of gold's recent strength. When central banks buy gold, they're making balance-sheet decisions that tend to be sticky and long-term. A 2025 World Gold Council survey found that 76% of central banks expect gold to represent a larger share of their reserves over the next five years, up from 69% the year before. This isn't hot money chasing returns; it's institutional conviction.

2. Geopolitics Has Become More Volatile

The European Central Bank's research confirms what markets have been pricing: gold "generally offers a safe haven" during periods of high geopolitical risk. Whether it's conflict escalation, sanctions regimes, or trade fragmentation, gold tends to do well when investors want insurance against non-linear risks. Reuters documented sharp safe-haven flows into gold during geopolitical flare-ups in early January 2026, a pattern that's repeated throughout this cycle.

3. Policy Uncertainty Is Elevated

Election cycles, fiscal debates, and central bank independence questions all create the kind of uncertainty that supports gold. During the U.S. election in late 2024, gold hit record highs as markets priced in uncertainty around fiscal policy, trade, and potential political tensions. The ECB notes that gold performs well in these policy-uncertainty regimes, acting as a volatility hedge around binary political outcomes.

4. Currency Diversification Is Real (But Nuanced)

The "de-dollarization" narrative is popular, but the reality is more measured. The IMF confirms that the dollar's share of global reserves has declined gradually over two decades, consistent with diversification. However, Federal Reserve research from 2025 found that not all gold buying equals a move away from the dollar, some countries are diversifying, others are hedging sanctions risk, and some are doing both. The prudent framing is "reserve diversification plus geopolitical hedging" rather than declaring the end of dollar dominance.

5. Retail Investors and ETFs Are Back

While central banks laid the foundation, retail investors and ETF flows have amplified the moves. The World Gold Council noted a return of Western ETF investment in 2024, while the ECB flagged rising gold ETF inflows as evidence of retail participation, and potentially more speculative behaviour. This combination can create momentum on the upside but also sharper drawdowns when positioning gets crowded.

6. AI Is Changing Market Structure

This one's less obvious but worth understanding. As artificial intelligence becomes embedded in trading and risk systems, financial regulators are raising concerns about market stability. The Bank of England warns that AI could lead participants to act collectively in ways that reduce stability. The Financial Stability Board highlights risks including market correlations, cyber vulnerabilities, and model risk. The Bank for International Settlements emphasizes the need for human oversight in AI-driven trading systems. The connection to gold? When markets become faster, more correlated, and potentially more unstable, the value of portfolio insurance assets like gold increases.

What This Means for Portfolios

Gold's current support looks more structural than cyclical because the official-sector demand has remained consistently elevated. The strongest fundamental tailwinds tend to be falling real yields, dollar weakness, geopolitical or policy uncertainty spikes, and persistent central bank buying.

That said, positioning risk matters. When ETFs and retail flows are involved, they can amplify both upside moves and downside air pockets.

Three Risks to Watch

Real yields rise sharply. If rates surprise higher, gold can retrace quickly since it doesn't pay interest. The mitigation: size gold positions as insurance, not as your core return driver, and avoid using leverage.

Geopolitical calm returns. If tensions de-escalate and policy clarity improves, the safe-haven premium fades. The mitigation: define gold's role in your portfolio upfront, is it a hedge or a return-seeking position? and match your time horizon accordingly.

Crowded positioning unwinds. When speculative flows reverse, gold can experience sharper drawdowns. The mitigation: stage your entries, use rebalancing rules, and avoid chasing the narrative at price extremes.

A Simple Framework

If your primary portfolio risk is policy or geopolitical tail risk, treat gold as strategic insurance. If your primary concern is short-term drawdown, keep your gold allocation modest and rules-based, given its volatility.

Gold isn't back in fashion because of hype. It's back because the world has become more uncertain, central banks are voting with their reserves, and the traditional conditions that support gold, policy uncertainty, currency diversification, and risk-off sentiment, are all present at once. Whether that continues depends on how the macro environment evolves, but for now, gold has reclaimed its role as a portfolio anchor in turbulent times.