The one asset class that's supposed to exhibit restraint and stability, gold, has turned into speculators' favourite instrument of late. Over the past year, the yellow metal has gained over 80%, with 50% of that coming in just the last six months. To put that into perspective, the last five years have only seen a total 200% gain, and this period included a global economic shutdown and multiple conflict escalations. Gold's less fashionable cousin, silver, has fared even better, accumulating 189% over the last 12 months alone. Clearly, what we're seeing here is the wholesale rejection of fiat in favour of real assets, an unsurprising trend really given the global macroeconomic and geopolitical context.
In addition to Europe, the Middle East has become a major hotspot, with tensions growing between the US, Israel and Iran. The trade conflict with China is also far from resolved, and tariffs remain an ever-present threat. Add to this the issues of lower real yields on a host of dollar-denominated fixed income assets, accelerated central bank buying, and the expectations of a new rate-cutting campaign under Trump's new Fed chair, Kevin Warsh, and it's obvious why precious metals are in demand. In this article, we'll discuss these key factors and more as we attempt to plot gold and silver's potential course into the second half of 2026.
An uncertain world
It's no secret that negotiations between the United States and Iran, especially over nuclear issues and broader Middle East security, do not look likely to bring about lasting agreements, keeping risk perceptions high. Recent periods of diplomatic friction and military posturing, including troop movements and naval activity near strategic chokepoints like the Strait of Hormuz, have amplified the market's anxiety and made the flight towards safe-haven assets all the more pronounced. With the recent example of Venezuela fresh in many investors' minds, the risk of Trump actually trying to invade Iran is genuine. The fallout is likely to be much more severe, however, with the Islamic Revolutionary forces both capable and inclined to destroy regional oil production capabilities in an eventual retaliation.
This, in turn, will devastate equities and leave haven assets the only viable investment. Some analysts have suggested that if conflict escalates further (beyond diplomatic deadlock), gold could gain an additional premium, potentially 15% or more, as risk‐averse demand spikes. A sixth round of formal China-US trade negotiations is set to take place soon, focusing on tariff issues and extending or adjusting earlier agreements. The key topics include how to transition or extend previous short-term tariff truces, possible adjustments to rare earth export rules, and how either side might ease restrictions or countermeasures. If we get some real progress, then this will surely calm markets and likely lead to a cooling of precious metals. However, Trump is known for irrational displays and could easily decide to implement more punitive measures, thus sparking increased gold buying. In this general climate of enhanced uncertainty, many investors are looking for something tangible and secure, and if that can also provide high growth as gold has done of late, that macrotrend will take some time to dissolve.
Trading softly
The weakening of the US dollar is becoming increasingly difficult to ignore. It's now lost over 10% against its major competitors and shows little sign of regaining that ground in a world where real yields continue to fall amid a combination of sticky inflation and softening economic policy. The US GDP-to-debt ratio is now well over 120% and growing, and so it's unsurprising that we're seeing a loss of confidence in the world's reserve currency. This trend is only intensified by the deliberate weaponisation of the dollar, which is prompting many non-aligned countries to diversify into other currencies like the RMB and, of course, precious metals. World central banks have been on a gold-buying spree since 2020, collectively purchasing around 863 tonnes of gold in 2025, one of the largest annual totals ever recorded. The People's Bank of China has been consistently acquiring for 15 consecutive months, while Turkey has added around 74.8 tonnes in the past year alone. The single biggest buyer, however, has been Poland with over 100 tonnes purchased.
The fact that the most aggressive gold buyer is an ostensive US ally shows just how deep the disdain for the dollar has become, and the cyclical relationship between higher gold prices and a lower USD nominal value will only make this trend harder to buck. If we also take into account the strong expectations of even more dovish policy under Trump's pick for Fed chair, Kevin Warsh, it's hard to see a way back for the greenback in the short-to-medium term. Following the latest FOMC minutes, the CME's FedWatch tool now only predicts a 50% probability of a 25 basis point reduction in June, after many Fed officials voiced willingness to prolong the pause on cuts. However, Trump has made clear what he expects of his new man at the Fed, and one feels that the rate cuts will have to materialise sooner rather than later. This, in turn, will only keep inflation elevated and reduce bond yields further, thus boosting demand for gold.
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