Why I Was Bullish Gold Into 2026

Executive Summary#

Investment View#

My view was that the market was still interpreting gold too narrowly.

The conventional framework treated gold primarily as a non-yielding asset that should rise when interest rates fell and weaken when they rose. That relationship remained important, but it did not fully explain the strength of demand through 2025. Gold had continued to make record highs while real yields remained positive, central banks were still accumulating reserves, and investor demand had broadened materially.

The variant perception was therefore straightforward:

Gold was not only a Federal Reserve easing trade. It was increasingly a hedge against duration risk, fiscal credibility and a more fragmented reserve system.

That broader framework supported a bullish 3–6 month view, with a tactical target of $6,000 per troy ounce.

Positioning#

Recommended Position: Long COMEX Gold

Publication Date: 29 January 2026

Original Horizon: 3–6 Months

Market Background#

Gold entered 2026 after an exceptional year.

World Gold Council data showed that the LBMA Gold Price PM set 53 new all-time highs during 2025. Total demand, including over-the-counter activity, reached 5,002 tonnes, while the annual average gold price rose to $3,431/oz.

The composition of demand was more important than the headline price move.

Gold-backed exchange-traded funds added 801 tonnes in 2025, the second-strongest year on record, while central banks purchased a net 863 tonnes. Mine production increased by only 1% to approximately 3,672 tonnes. This was not a market supported by one narrow buyer group: investment demand, official-sector demand and physical supply constraints were all contributing.

That evidence required a more balanced thesis than the original student presentation, which had understated ETF participation and overstated central-bank purchases at more than 1,000 tonnes. The verified figures still supported a bullish structural view, but for more precise reasons.

Investment Thesis#

The thesis rested on four connected ideas.

1. Real Yields Were the Key Monetary Variable#

Gold does not produce income, so the return available on inflation-protected government bonds matters directly to its opportunity cost.

On the publication date, the US 10-year inflation-indexed Treasury yield was 1.89%. My view was not that real yields had to collapse. Rather, gold’s upside asymmetry improved if slowing growth, persistent inflation or a repricing of term risk prevented real yields from moving materially higher.

The position therefore had a clear macro boundary. A sustained move above roughly 2% would indicate that the opportunity cost of holding gold was rising and that the original timing assumption was weakening.

This was more disciplined than simply arguing that lower policy rates would lift gold. The relevant question was whether inflation-adjusted yields could remain contained while fiscal borrowing and policy uncertainty stayed elevated.

2. Central-Bank Demand Had Become Structural#

Central banks purchased 863 tonnes of gold in 2025. That was below the exceptional pace of more than 1,000 tonnes recorded in each of the previous three years, but it remained far above the 2010–2021 annual average of 473 tonnes.

Poland was the largest reported buyer, adding 102 tonnes, while China and Turkey also increased their reserves.

This demand was strategically motivated. Reserve managers were responding to geopolitical risk, sanctions exposure, portfolio diversification and the desire to hold an asset without sovereign credit risk.

However, it would be inaccurate to describe central banks as completely price-insensitive. The World Gold Council noted that record prices encouraged a more cautious pace of reported buying during parts of 2025. The stronger formulation was that official-sector demand was less cyclical and less momentum-driven than many private investment flows.

That distinction mattered because it implied a more durable source of demand without assuming an unconditional floor under the market.

3. Gold Was Pricing Fiscal Credibility, Not Only Inflation#

The most differentiated part of the thesis concerned fiscal policy.

The Congressional Budget Office’s January 2025 baseline projected a federal deficit equal to 6.2% of GDP in fiscal year 2025 and public debt equal to 100% of GDP. It also expected debt to rise over the following decade as mandatory spending and net interest costs grew faster than revenues.

Large deficits do not automatically produce higher gold prices, and the term fiscal dominance should not be used as a substitute for analysis. The relevant transmission mechanism was more specific:

Persistent borrowing increases the volume of duration the market must absorb.
Higher interest expense makes fiscal adjustment more difficult.
Investors face greater uncertainty over the long-run interaction between fiscal and monetary policy.
Demand can rise for assets whose value is not a direct claim on a sovereign balance sheet.

Gold therefore functioned less as a mechanical hedge against the next inflation print and more as protection against uncertainty around the purchasing power and credibility of sovereign liabilities.

4. Reserve Diversification and Geopolitical Risk Added Convexity#

Gold is globally recognised, highly liquid and free from the default risk of an issuing government.

Those features become more valuable when international relationships fragment and reserve managers place greater weight on sanctions risk, custody arrangements and political neutrality.

The thesis did not require the US dollar to lose its role as the dominant reserve currency. A gradual increase in gold’s share of global reserves was sufficient to create meaningful incremental demand because the annual mine-supply response was limited.

Geopolitical risk added further asymmetry. De-escalation could remove some safe-haven demand, but a severe deterioration could produce a much faster increase in defensive positioning.

Fundamental Analysis#

Investment Demand Was Already Strong#

The original presentation described ETF positioning as light relative to previous cycles. Full-year data released by the World Gold Council showed that this was not correct.

Global gold ETFs added 801 tonnes during 2025, while US-listed funds alone attracted 437 tonnes. Investment demand had already become a major driver of the rally.

This correction did not invalidate the bullish thesis, but it changed the risk profile. Strong existing participation meant less unused positioning capacity and a greater possibility of profit-taking or forced deleveraging if momentum reversed.

The more accurate conclusion was that gold had broad sponsorship, not that investors were materially under-positioned.

Supply Was Slow to Respond#

Mine production increased by approximately 1% in 2025 to a record 3,672 tonnes.

That figure contradicted the original description of mine supply as entirely flat, but it still demonstrated limited short-term supply elasticity. New mines require long lead times, while permitting, capital intensity and ore quality constrain how quickly higher prices can translate into additional output.

Gold’s supply profile therefore supported the thesis, but it did not create a hard price floor. Recycling remained responsive to higher prices and could provide additional supply during periods of stress.

Key Catalysts#

Principal Risks#

A Sustained Rise in Real Yields#

This was the clearest invalidation condition. A durable move above roughly 2% would increase the opportunity cost of holding gold and challenge the expected timing of the trade.

Positioning and Momentum Reversal#

Because ETF and speculative participation had already strengthened materially, a reversal in momentum could produce selling that overwhelmed structural physical demand over shorter horizons.

Stronger US Dollar#

A sustained dollar rally could tighten global financial conditions and reduce the affordability of dollar-denominated gold for non-US buyers.

Slower Official-Sector Demand#

Central-bank demand was historically elevated but not immune to price. A meaningful slowdown would remove an important source of support and leave the market more dependent on private investment flows.

Fiscal Narratives Without a Market Catalyst#

Large deficits can persist for long periods without producing an immediate loss of confidence. The fiscal argument was structurally relevant, but it could not by itself guarantee returns within a 3–6 month horizon.

Investment Conclusion#

The original bullish view was supported by a credible combination of real-yield sensitivity, official-sector demand, large fiscal deficits and reserve diversification.

The strongest insight was that gold’s role had broadened beyond a simple inflation or rate-cut trade. The weakest part of the original work was the assumption that a structurally attractive asset would necessarily deliver the forecast return within a short tactical horizon.

The $6,000 target was therefore best understood as a scenario dependent on continued momentum and contained real yields—not as a valuation conclusion with a hard fundamental anchor.

Research Methodology#

The revised analysis separates three categories of evidence:

Contemporaneous market data: gold prices and real yields around the publication date
Fundamental data available at publication: 2025 demand, supply, ETF and central-bank figures
Subsequent evidence: price performance and whether the stated invalidation conditions were triggered

Sources were prioritised in the following order:

Official economic data
Industry data with disclosed methodology
The original Queen’s Tower Capital presentation for the historical trade framework

This approach preserves the original thesis while correcting figures that were inaccurate or insufficiently supported.

Outcome and Reflection#

The trade did not achieve its $6,000 target within the stated 3–6 month horizon.

Gold reached an LBMA Gold Price PM record of $5,405/oz on 29 January and traded above $5,500 intraday during the late-January surge. It then experienced extreme volatility, falling below $4,000/oz in late June. By 26 June, gold was down approximately 7% year to date.

The original real-yield invalidation also became relevant. The US 10-year real yield moved above 2% in late March and rose above 2.15% during May and June, reaching 2.35% by 16 July.

At the same time, the structural demand thesis was not entirely wrong. The World Gold Council’s Q2 release revised first-quarter central-bank demand down to 56.5 tonnes and estimated 288.9 tonnes for Q2, taking first-half demand to 345 tonnes. The revision weakens the original claim of uninterrupted official strength, while the Q2 rebound still supports the longer-run reserve-diversification case.

The result was therefore mixed at the analytical level but unsuccessful at the trade level:

Correct: official-sector demand remained elevated
Correct: gold continued to respond to fiscal, geopolitical and reserve-diversification themes
Incorrect: the $6,000 target was not reached
Incorrect: the thesis underestimated the severity of positioning-driven downside
Invalidated: real yields eventually rose through the stated risk threshold

The principal lesson is that a durable structural thesis does not remove the need for tactical risk management. A better process would have distinguished the long-run allocation case from the 3–6 month trade, reduced exposure once the real-yield threshold was breached, and treated strong ETF participation as a source of two-way volatility rather than only upside potential.

Sources#

Originally researched and prepared by Srinivas Medida while serving as Commodities Sector Head at Queen’s Tower Capital, Imperial College Investment Society. Revised and expanded for publication on SM Research. Material public-market figures were checked against the sources listed below; contemporaneous presentation figures are identified as such. The investment view reflects the assessment made on 29 January 2026; the outcome evidence was last checked on 27 August 2026. This material is provided for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument.