RIYADH: The geopolitical risk premium that has helped lift gold prices over the past few years is set to continue and possibly expand as the year progresses, according to an industry body.
In its latest report, the World Gold Council said that rising gold prices are weighing on jewelry demand, while mine supply is expected to increase slightly in response to stronger margins and higher prices.
Amid the escalating conflict in the Middle East region, gold has experienced heightened safe-haven demand as investors seek protection from geopolitical uncertainty, supply disruptions, and volatile energy prices.
During the initial days of the conflict, gold prices surged to a record high above $5,400 per ounce, but have since pulled back toward the $4,500 to $4,700 range in late April, pressured by a stronger US dollar and inflation concerns stemming from elevated oil costs.
“Jewellery spend is likely to be resilient, absent economic shocks, but tonnage demand is expected to slip further as high prices and regional tax policies continue to bite,” said WGC.
It added: “Mine production is likely to rise modestly again in 2026, although we are monitoring the effects of energy shortages on operations in some regions.”
According to the report, global geopolitical tensions, especially the ongoing conflict in the Middle East region, are expected to remain the dominant drivers of gold demand through 2026 and beyond.
It added that this sustained demand will be driven by continued central bank net buying, broad global gold exchange traded fund, or ETF, inflows, and bar and coin accumulation.
“Geopolitics remain front and center in our outlook for gold demand in 2026. Our view remains that investment and central bank demand will be supported by ongoing geopolitical risk, with further investment impetus from elevated inflation and persistent high gold prices,” said WGC.
The outlook reflects a broader trend of resilient gold demand driven by geopolitical risk, inflation concerns, and ongoing interest from institutional investors. While elevated prices are reshaping demand patterns across different segments, they continue to reinforce gold’s position as a strategic store of value.
While demand for gold ETFs and over-the-counter products is expected to stay positive, it will likely fall short of 2025 levels.
Bar and coin demand is likely to remain strong in 2026 as high prices, a lack of viable alternative investments in some markets, inflation fears, and heightened uncertainty continue to attract both retail and investment buyers.
According to WGC, gold demand for the first quarter of this year, including over-the-counter trade, increased by 2 percent year on year to 1,231 tons.
This modest growth in volumes, combined with gold’s exceptional price rise, generated a 74 percent jump in the value of quarterly demand to a record $193 billion.
Bar and coin demand during the first quarter was up 42 percent year on year to 474 tons, the second-highest quarter on record, as Asian investors led the charge.
