Why a ‘doom loop’ could push gold higher in 2026

So, what can we expect in 2026?

Concerns about a softening US labour market are mounting, while there is ongoing debate about inflation, as there is in Australia. Will inflation stay stubbornly high or even face renewed upward pressure?

Markets are largely pricing in a continuation of the status quo, but divergences in macro data and the ongoing geoeconomics volatility mean there will be nuances, and no one can discount the possibility of more extreme events.

So, the World Gold Council’s 2026 Gold Outlook has examined three potential scenarios other than the market consensus.

1. A shallow slip in macroeconomic conditions (moderately bullish)

This scenario sees a potential reset in the AI boom on equity markets, acting as a drag on the wider market and the main indices. This would amplify market volatility and encourage further de-risking.

At the same time, the US labour market could track softer, and consumer spending could weaken, creating a broader slowdown in global growth. If this occurs, the US Federal Reserve would likely cut rates faster and deeper than current expectations, responding to the economic uncertainty and expectations of cooler inflation.

The impact on gold in this scenario would be moderately bullish, creating a supportive environment for continued gold demand and a rise in the price. Our analysis – see notes under chart 2 – suggests that, in this environment, gold could rise between 5% and 15% on current levels, depending on the magnitude of the rate cuts and the severity of the economic slowdown.[3]

Central bank buying would continue, and there may be new entrants into investment markets, such as Chinese insurers or Indian pension funds.

A 5% to 15% rise in the gold price would represent a solid return and a normal year, but coming after the stellar performance of 2026, it would still be a noteworthy follow-up.

2. The doom loop (bullish)

This is the most bearish scenario for the economy, but one that would have the most positive impact on the gold price. It reflects the chance that the global economy could move into a deeper and more synchronised slowdown.

Geopolitical risks could manifest larger as unresolved regional conflicts continue or even intensify, or a new flashpoint could emerge to further erode confidence.

This could occur alongside tensions around trade, fragmenting the market environment and impacting confidence and investment.

Business investment and consumer spending could be scaled back.

If the US growth was to weaken further and inflation fall below target, this ‘doom and gloom’ scenario could prompt some aggressive rate cutting from the Fed, which would drive the US dollar lower and see long-term yields decline sharply.

A combination of these factors in the ‘doom loop’ would create exceptionally strong tailwinds for gold as investors sought out safety.

In this scenario, gold could move sharply higher, and our analysis shows a potential surge of between 15% and 30% over 2026.

The main beneficiary of this would likely be gold ETFs, which have seen US$77bn in inflows between January and November this year, and this would offset a potential weakness in demand for gold in other areas of the market, such as jewellery or technology.

3. Reflation Return

This is the most bearish scenario in terms of its impact on the gold price. In this environment, the Trump administration’s economic policies are successful, and the fiscal support delivers stronger-than-expected growth.

Reflation would take hold and lift global growth on a higher trajectory, forcing the Fed to hold or even hike rates in 2026. This would push long-term yields higher and strengthen the US dollar, increasing the opportunity cost of holding gold and forcing a reallocation of capital back to US assets.

With economic sentiment improving, the environment would move to risk-on.

Gold ETFs would see sustained outflows as investors rotated back into equities and higher-yielding assets.

All of this would have a negative impact on the gold price, resulting in a correction of between 5% to 20% on current levels.

Taken together, higher opportunity costs, risk-on sentiment and negative price momentum could create a challenging environment for gold if these reflation conditions are borne out.

Wildcards

Beyond these scenarios, Central Bank demand – which was a significant driver of demand in 2025 - could become unpredictable. While there are good reasons to expect central bank buying to continue, the buying process is often dictated by policy rather than market conditions alone.

If central banks pull back on buying, this could create additional headwinds for gold.