Onome Amuge
In a world of geopolitical uncertainty, persistent inflation, and uneven economic growth, investors are rethinking their portfolios. The World Gold Council (WGC) latest Gold as a Strategic Asset 2026 report notes that gold is emerging as more than a traditional safe haven, as it transitions into a strategic investment capable of boosting returns while managing risk across diverse market condition
Gold has historically been perceived as a safe-haven asset, particularly attractive during periods of economic uncertainty. Yet the 2026 edition of the World Gold Council’s report underscores that gold’s value proposition extends well beyond crisis management. Its appeal lies in a combination of scarcity, liquidity, and diversification benefits, underpinned by demand from multiple sources, including investment, jewellery, technology, and central banks.
“Gold is a highly liquid asset, which carries no credit risk, and its above-ground stock grows slowly over time. It has historically preserved value, outperforming most currencies and commodities over the long term,” the report notes.
Since the collapse of the US gold standard in 1971, the LBMA Gold Price has delivered a compound annual growth rate of 9 per cent in US dollars, a return broadly comparable to equities and substantially higher than that of bonds.
The World Gold Council introduces its Gold Long-Term Expected Return (GLTER) framework to quantify this dynamic. The model states that gold’s long-run returns closely mirror global GDP growth, providing a buffer against inflation and a potential source of capital appreciation.
For investors, diversification is only valuable if it functions when needed most. Recent market turbulence, from the 2022 and 2025 equity pullbacks to the lingering effects of quantitative easing during the COVID-19 pandemic, has shown that many traditional portfolio diversifiers fail precisely when portfolios are under stress. Bonds, for instance, have become increasingly positively correlated with equities as inflation has risen, eroding their conventional risk-balancing role.
Gold, by contrast, exhibits negative correlation to equities and risk assets during extreme sell-offs. The World Gold Council cites the global financial crisis of 2007–2009 as a case study. While equities, hedge funds, real estate, and most commodities fell, gold rose 21 per cent in US dollars from December 2007 to February 2009. Similarly, during the 2022 and 2025 market corrections, gold maintained positive performance, reaffirming its role as a defensive portfolio component.
Yet gold’s utility is not confined to bear markets. Its dual nature as both an investment and a consumer good, enables it to deliver positive returns during periods of economic expansion. Rising wealth drives jewellery demand, while investment demand responds to inflation expectations.
Unlike some alternative investments that can be difficult to unwind during crises, gold benefits from deep and liquid markets. In 2025, daily trading volumes in gold averaged $361 billion, split roughly equally between over-the-counter (OTC) spot contracts and exchange-traded derivatives. Physically-backed gold ETFs added an additional $7 billion of daily liquidity, providing both institutional and retail investors with accessible avenues for entry and exit.
By comparison, the daily trading volumes of many leading financial assets, including top US equities and certain government bonds, are often lower or less consistent, especially under stressed market conditions. Gold’s liquidity ensures it can serve as a reliable source of capital when other assets may be illiquid or mispriced, reinforcing its strategic value in both defensive and opportunistic investment strategies.
The World Gold Council report also quantifies the portfolio benefits of gold inclusion. Using a representative hypothetical portfolio (50% equities, 40% fixed income, and 10% alternatives), researchers found that allocating even 5 per cent to gold improved risk-adjusted returns while reducing drawdowns. Over a 20-year horizon, a 5 per cent gold allocation would have increased the portfolio’s risk-adjusted return from 68.1 per cent to 73.2 per cent, while lowering maximum drawdowns from -34.9 per cent to -32.7 per cent.
Gold’s reputation as an inflation hedge is well documented. In years when US inflation ranged between 2 per cent and 5 per cent, gold prices rose an average of 10 per cent annually, with gains accelerating during periods of higher inflation. The metal has also performed well in deflationary environments, where low interest rates and financial stress amplify investment demand for non-yielding assets.
Gold is seen to have outperformed major currencies over decades. The stock of above-ground gold increases at a measured 1.7 per cent per year, contrasting with the expansion of fiat money (7.3% per year across major currencies over the past 25 years). Episodes of quantitative easing, implemented after the global financial crisis and during the COVID-19 pandemic, created optimal conditions for gold to track currency debasement, preserving purchasing power when paper money eroded.
The growing integration of ESG principles in investment strategy has implications for gold. While mining is inherently extractive, responsible producers follow stringent environmental frameworks, and the industry contributes meaningfully to host communities through wages, taxes, infrastructure development, and access to healthcare and education.
Despite its advantages, gold is not without drawbacks. It does not generate cash flows or yield income, unlike bonds or dividend-paying equities. Investors depend on price appreciation for returns, although historical data suggest that gold has consistently delivered long-term gains.
Gold’s resilience is underpinned by diverse sources of demand. Investment, jewellery, technology, and central bank purchases collectively account for over 3,100 tonnes annually, equating to S$351 billion at 2025 prices. Consumer demand remains pro-cyclical, rising with economic growth, while investment and central bank demand are counter-cyclical, strengthening during periods of market stress. This multi-faceted demand profile supports gold’s role as both a store of value and a portfolio enhancer.
Outlook: Gold’s relevance in 2026 and beyond
Perceptions of gold have evolved significantly over the past two decades. Wealth accumulation in Asia, coupled with growing institutional recognition of gold’s portfolio utility, has cemented its position as a strategic asset rather than merely a speculative or decorative commodity.
The World Gold Council concludes that gold’s dual appeal as an investment and a consumer good, enables it to generate consistent returns in both bullish and bearish markets. Its scarcity, liquidity, and low correlation with other asset classes make it an essential diversifier, while its ESG credentials and potential climate risk mitigation offer added relevance in today’s investment environment.
Market observers note that ongoing economic uncertainty, from geopolitical tensions to volatile equity and bond markets, is likely to sustain demand for gold. Institutional investors, in particular, are increasingly viewing it as a stabilising force that enhances portfolio resilience and risk-adjusted returns.
