The geopolitical risk premium that has driven gold prices higher in recent years is expected to persist and possibly expand through 2026, according to the World Gold Council (WGC). In its latest report, the industry body noted that rising gold prices are weighing on jewelry demand, while mine supply may increase slightly due to stronger margins and higher prices.
Safe-Haven Demand Amid Middle East Conflict
As the conflict in the Middle East escalates, gold has seen heightened safe-haven demand. Investors seek protection from geopolitical uncertainty, supply disruptions, and volatile energy prices. Gold prices surged to a record above $5,400 per ounce in the early days of the conflict but have since retreated to the $4,500–$4,700 range in late April, pressured by a stronger US dollar and inflation concerns from elevated oil costs.
Impact on Jewelry and Mine Supply
The WGC stated, “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.” Mine production is expected to rise modestly again in 2026, though the council is monitoring energy shortages affecting operations in some regions.
Key Drivers of Gold Demand
Global geopolitical tensions, especially the Middle East conflict, are expected to remain dominant drivers of gold demand through 2026 and beyond. Sustained demand will be supported by continued central bank net buying, broad global gold ETF inflows, and bar and coin accumulation. The WGC emphasized, “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.”
Investment and Retail Demand Trends
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 expected to remain strong in 2026 as high prices, lack of viable alternative investments in some markets, inflation fears, and heightened uncertainty attract both retail and investment buyers.
First Quarter 2026 Performance
According to the WGC, total gold demand for the first quarter of 2026, including over-the-counter trade, rose 2 percent year-on-year to 1,231 tons. This modest volume growth, 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 surged 42 percent year-on-year to 474 tons, the second-highest quarter on record, led by Asian investors.
