With equities extended, bonds recalibrating to a new rate regime, and geopolitical noise refusing to fade, precious metals are likely to feature prominently yet again in client conversations this year, writes Justin Lin.
Gold delivered an exceptional 2025, returning around 65 per cent in USD terms and outperforming nearly all asset classes.
There was no single driver for this outperformance, but rather a rare confluence: falling US yields, heightened geopolitical volatility, ongoing concerns about currency debasement, and robust central bank buying. Many of those tailwinds, in our view, remain in place.
Gold is a non-yielding asset that tends to benefit when interest rates fall, as the opportunity cost of holding it declines. The US Federal Reserve resumed its cutting cycle in December 2025, and the current administration has telegraphed ambitions for up to 150 bps of reductions. If realised, that path should continue to support gold’s relative appeal against income assets.
Beyond the arithmetic of lower nominal yields, any market narrative that revives concerns about central bank independence, such as uncertainty around the newly appointed Federal Reserve chair, can reinforce the “debasement” trade and elevate gold’s strategic bid.
The role of central banks
World Gold Council data indicate net central bank purchases remained strong into the end of 2025. On a tonnage basis, the annual total may look softer versus prior years, but that’s largely a function of higher prices rather than fading demand. In nominal terms, central banks are tracking toward a record US$100 billion of gold purchases for 2025.
For 2026, we expect tonnage to moderate further but nominal expenditures to remain elevated, consistent with an environment where emerging markets continue to seek diversification away from US-dominated financial rails.
The People’s Bank of China reporting a 14th consecutive month of purchases underscores that risk-management, reserve-diversification impulse.
Geopolitics: a persistent option on upside
Markets have adjusted to a more volatile geopolitical tape, but “unexpected” events (e.g. Greenland, Venezuela), whether localised conflict, sanctions flare-ups, or commodity disruptions can still catalyse flight-to-safety flows. In 2026, gold remains one of the cleanest hedges against geopolitical surprise.
Gold’s recent performance and macro backdrop suggest it may continue to attract attention among asset allocators.
In 2026, gold looks to provide a blend of growth and risk-hedging, a mixture that is rare, and particularly relevant when forward-looking return dispersion across traditional assets is wide and tail risks remain non-trivial.
Silver: volatility and opportunity
Silver’s 2025 was even more dramatic than gold, up around150% in USD terms and driven by short-term supply dislocation layered atop structural tailwinds. The December quarter saw a liquidity drain from London, propelling benchmark prices to all-time highs. Three overlapping forces mattered:
- Tariff-related flows: Section 232 investigations and early tariff fears diverted significant metal toward COMEX. The US government shutdown paused resolution, keeping metal parked and liquidity tight.
- Exceptional Indian jewellery demand: Ahead of Diwali, local premiums spiked to unprecedented levels, intensifying near-term tightness.
- Speculative ETF momentum: As silver’s “monetary-metal” narrative gained traction, momentum-chasing flows amplified price moves.
We anticipate continued growth potential for silver in 2026, but at a moderated pace relative to last year’s outsized gains. Near-term risks to current price levels remain elevated. The critical variable is US’s decision on tariff enforcement. If silver is ultimately excluded (possibly on the basis of its monetary status) removal of tariff anxiety could trigger steep US destocking, producing a sharp price reversal before a stabilisation phase.
Gold-silver ratio (GSR) as a tactical guide
Should silver fall from its current levels, the resulting pullback may present a compelling entry point, especially if the GSR widens into stretched territory (90+), or if spot silver retraces below ~US$60/oz. For advisers, using the GSR to stage entries and rebalance exposure can be a pragmatic way to introduce discipline amid high volatility.
Beyond the liquidity narrative, silver’s industrial footprint in electronics, solar PV, EV components, and emerging energy applications, supports a longer-term, industrial bull case. On the precious metals side, if gold maintains strength, silver is likely to follow, especially once the current supply distortions fade.
For investors thinking of allocating to portfolios, silver sits within a tactical, high-volatility sleeve with asymmetric potential. Potentially attractive following correction, rather than during its current rally. That is to say, investors who wish to proceed should do so with careful position sizing and strict rebalancing rules.
Role in portfolios
Gold can play a central role in portfolios as both a defensive anchor and a potential return driver. Its ability to hedge against macro uncertainty while offering upside in a falling-rate environment makes it a natural complement to traditional safe-haven assets like sovereign bonds and cash. For investors seeking stability without sacrificing growth potential, gold provides a unique blend of qualities that can strengthen overall portfolio resilience.
Silver, on the other hand, is better suited as a tactical allocation. Its higher volatility and sensitivity to market dislocations mean it should be introduced with clear entry and exit strategies. When positioned thoughtfully, silver can enhance growth exposure and offer asymmetric upside, particularly as industrial demand strengthens or when gold’s momentum spills over into the broader precious metals complex. Pairing silver with gold is another option and can help mitigate idiosyncratic risk while capturing the complementary benefits of monetary and industrial dynamics.
Conclusion
As 2026 unfolds, precious metals continue to warrant close attention from advisers navigating an unsettled macro landscape. Gold’s combination of defensive characteristics and upside optionality remains compelling amid falling rates, persistent geopolitical risk and ongoing central bank diversification. It offers a rare portfolio ballast at a time when traditional diversifiers face uncertain efficacy.
Silver, while supported by structural industrial demand and monetary spillovers from gold, comes with elevated volatility, which calls for patience and discipline. Silver’s entry points are best guided by valuation metrics such as the gold‑silver ratio.
Gold and silver can play complementary roles within diversified portfolios designed to manage risk while preserving long‑term return potential.
Justin Lin is investment analyst at Global X ETFs Australia.
