Jason Daw:
Hello, and welcome to Macro Minutes. During each episode, we'll be joined by RBC Capital Markets experts to provide high conviction insights on the latest developments in financial markets and the global economy. Please listen to the end of this recording for important disclosures.
Hi everyone, and welcome back to Macro Minutes. I'm your host, Jason Daw, and we're excited to announce an evolution of the podcast. Macro Minutes is expanding to bring you more of our high conviction insights from our desk strategists and research analysts. You will continue to hear about macro and global asset markets, but now we're introducing two new monthly segments, a dedicated regional deep dive on Europe and another on emerging markets.
Our goal is to provide you with a comprehensive view of the macro and rates dynamics that are shaping markets worldwide, and the cross market interconnections that matter for your positioning. So to kick us off in this new format, I'm joined today by Chris Louney, our commodity strategist, for this episode titled A Golden Opportunity with obviously a big question mark. And this episode's being recorded on February the 4th, 2026, to explore what is going on in the gold market.
And I think, wow, with a big exclamation point, is the only phrase we can use to describe what's been going on in gold in the past 12 months. Price moves have been parabolic. The recent correction severe, but dip buyers have come back to push gold back slightly above 5,000 at the time of recording. And it does seem to be a confluence of factors that have conspired to be the perfect storm for gold. But I'm just a tourist in the gold market, so we're excited to have an expert in the space. Chris, join us today to tell us if there's still a golden opportunity in the shiny metal.
So let's kick it off, Chris. Let's get it out of the way. Gold's seen immense volatility over the past couple of weeks. And even before that was on quite a tear. Even after coming off a record year in 2025, set the context for us for what happened in 2025, what lessons that were learned and what your base case outlook is for 2026.
Chris Louney:
Thank you, Jason, for having me. And yeah, it's been quite over a year now. I think past experience, both in 2025 and to date in 2026, really makes for quite an impressive 13 months, but that rally stretched back into prior years as well. And I think looking back at least to 2025 can give us some helpful context to both the possible extent and the duration of a gold rally like this. So thinking back to 2025, gold prices were scaling somewhere between four and five all time highs per month on average. I believe it was 51 all time highs actually in totality in 2021, and at the end of the year, let's say around 65% higher.
As you can imagine, that meant it had crossed psychological barriers then, including and especially the $4,000 per ounce range, and that sounds like a pretty familiar story if you're paying attention to gold markets over the last little over a month so far in 2026. And so, having already set 10 new all time highs just in the first month of the year, that's obviously more than double last year's average pace, making another 2025 style year look possible.
Many of the same underpinnings are there, whether it's uncertainty or this gold positive macro backdrop. And so, despite putting aside some of the really immense volatility we've seen in recent weeks, it doesn't necessarily seem, when you back out to a high level, that there's really exhaustion in terms of accumulation from investors or from the official sector, which I'm sure we'll talk about. So what does this tell us? The early 2026 move was probably too frothy to be sustained. We've seen that come down. And a lot of that frothy positioning washed out of the market after that run up.
So perhaps there are limits to the pace of this rally at certain points. However, the extent of this rally I think could still have likes. And it's not a hard number, but we pointed out in some of our research that just using 2025's gains as a proxy, if gold were to scale similar ground and percentage terms, how could put gold as high as $7,100 per ounce at year-end? That's not our base case, but it's important to keep in mind some of the upside risks that are out there, particularly if we see this environment continue.
And so, this really begs the question, I think, in our view, whether or not that duration or length is possible. And so, looking to past rallies, these historical rallies, we've called out a few examples, 1976 to 1980, 2007 to 2011, 2015 to 2020 as examples, we see that an average to max length for these longer rallies is around 1,100 to 1,200 days. And so, the current extent, which is a bit over 850 days at the time of recording, is not without precedent. So looking back, this could put this rally at least into September, potentially mid-December, essentially the end of the year, based on the duration alone.
So it means that both the extent of this rally, in my view, and the duration of this rally are by no means unprecedented. And given the nature to gold, there isn't necessarily a hard limit. As I mentioned, some of these major drivers that we saw last year are still in place, even if they have changed forms. We've identified our top theme for this year as uncertainty. That's certainly played out already. And there's still a gold positive macro backdrop, which is really important obviously for the gold rally overall. And both of these have really carried over into 2026.
For our outlook, our view since the start of the year has been that gold would spend most of its time in the $4,500 to $5,000 per ounce range, with more sustainable upside later in the year. Our Q4, for example, high scenario was around 5203 per ounce, and that remains the case. But as I mentioned before, we must note that gold has outperformed our expectations before, and so we do have to be prepared, at least for the possibility that it does so again. And based on the last 13 or so months alone, the possibilities are wide and the risk is skewed to the upside. But I think the move lower after hitting yet another record high was probably a healthy move for the market overall.
Jason Daw:
Okay, great. Thanks a lot, Chris. What worries me is that part of the gold rally might have been related to concerns over Fed independence. And what concerns me about this type of price action is that one of the reasons underpinning a big move like we've seen all of a sudden disappears, then maybe there is a larger correction in the cards.
In that spirit, we think Fed independence worries are probably overblown. Warsh being nominated to the chair was probably the least dovish pick of the bunch. Ultimately, the data is going to drive decision making and the consensus process at the Fed is important, and the balance of risks on Fed independence probably won't change unless both Cook and Powell vacate their governor seats.
So Chris, you've written a lot about how uncertainty is arguably the top theme for gold in 2026. What exactly does that mean? And what from the sentiment or uncertainty channel was driving gold prices, in your opinion?
Chris Louney:
Yeah, that's a great question. Again, uncertainty is our top theme for this year. But for many of the reasons you described, there's risk in both directions, and it's part of why we're a bit conservative in our baseline view at least for gold prices. But what we saw over 2025 and already in 2026 was that uncertainty can take many forms. It's been trade and tariffs. It's been politics and government shutdowns. It's been concerned, as you mentioned about Fed independence, which may be overblown, geopolitics and armed conflict. And so over the last year, the flavor of uncertainty has changed, but I think uncertainty and totality has remained a relatively inconsistent theme.
And in 2026, we've seen it deliver some outsized price movements, obviously, and that remains a risk going forward in 2026, whether it's coming into the market, or coming out to the market. Uncertainty itself seems to be a key and enduring theme for gold in this current environment. And we focused obviously on 2025 and 2026, but we've seen this developing over the last few years. And the question why is this important? Gold is a catch-all hedge of last resort for risk. Often [inaudible 00:08:58] risks that I think investors maybe have difficulty hedging elsewhere in other markets, end up being expressed in gold.
Ultimately, gold has an emotional peal. It serves again as a hedge of last resort, largely because it's non-debasable, not really a currency, although some view it as one, and really it's no one else's liability, and its physical nature. And so, it drives this overall appeal for gold as a hedge, particularly against risks that, again, you may struggle to hedge elsewhere in markets. And this uncertainty has played out in investors' minds broadly. And in our conversations with investors over the last year plus, we kept this sense that there is a deep appreciation for the uncertainty out in the market.
I think anyone paying attention to headlines can appreciate that. But what that has resulted in from gold's perspective is much more comfort in growing gold allocations. So if we were to rewind the clock and think back to the early innings of this rally, which we're over 850 days in, so it's been a few years. So think back to the late 2022 through mid-2024 period. When you started to see gold prices start to increase, you were actually seeing selling of gold exchange rate of products, as prices rose. And so, our view at that time was that as gold prices were increasing, gold was essentially getting to the highs of various levels of allocation in investor portfolios, and as a result that they were selling gold again as those prices rallied.
Contrast that to what we're seeing now, where we continue to see an increase in gold holdings as prices are rallying, this is driven by a few things. One, some investors who are on the sidelines, or generous portfolios who are on the sidelines from gold's perspective, and has 0% allocations, have come into the market. There's been a lot of generalists coming to the market, a lot of tourists coming into the market. And for people who have had allocations for a longer time, typically we think of those historically in the 2 to 5% range. But I've been having conversations with lots of investors over the last year where that was changing to a 5 to 10%. And generally there's a softer ceiling on these allocations overall, and there's a lot more comfort, I think, in their market of allowing one's exposure to gold to run as a share of their portfolio, because of the uncertainty that's at play. And so, uncertainty has played a significant role in the changing level of allocations and comfort with growing allocations to gold, because of this environment.
You've also seen this sort of pop up in some ways in the reasons why central banks are allocating to gold. Central bank buying has been strong for a while. It's been driven largely by diversification, de-dollarization, some other reasons for specific central banks. But in last year's central bank survey from the World Gold Council, you also saw geopolitics emerge as a reason for why central banks were allocating to gold. So even in the official sector, you're also seeing this type of uncertainty layer into some of the psychology, investor psychology, in terms of why gold allocations are increasing, which does play a pretty important role for gold overall, that covers the two most often more volatile swinging line items in our balance, investor flows in central bank buying, and they're really strong partially as a result of this uncertainty. Whatever the flavor or driver of uncertainty is at a given time, it still contributes to the overall environment of uncertainty, which makes gold relevant.
Plus, given gold's price performance over the course of 2025, it certainly proved its role in terms of providing that hedge in a broader portfolio.
Jason Daw:
Thanks a lot, Chris. I guess just one thing to add to one of the things you were saying about central bank reserve portfolios, or other investors in the gold market. Somebody takes out 500 million or a billion or two billion out of US treasuries, for example, that's not really going to have a big price effect in the treasury market, but it could have a disproportionate effect in the gold market. So I think that's important for listeners to understand. And I guess also despite all the chaos that's been happening with US policy uncertainty over the past year, one interesting observation is that volatility in the rates market, credit market, the equity market, they are at or near their cycle lows.
FX volatility has risen a little bit from very low levels, but that might be more related to yen intervention risks, also the correction in gold, than other underlying risk premia type of things. So it's very interesting that risk premia in the context of uncertainty is only manifesting itself in the gold market, not other risk assets, or even crypto, for example.
Now, when we move on, monetary policy divergence is rising across the world. We've seen the Reserve Bank of Australia raise rates, the Bank of Japan raise interest rates. The Fed stands out a bit globally right now. How does that impact gold, especially in the context of what we're seeing in volatility and other asset markets? And you've talked about a gold positive macro backdrop, but how does all that shake out for gold?
Chris Louney:
Yeah, I want to touch on a few important points that you had there. One, the shift potentially out of other assets, if a sell US trade were to emerge in more significant size over a longer period, that would have similar outsize implications for gold. Not because gold in totality is a small market, but because it is generally smaller in relation to some of these other asset classes when you're pulling it all together. And for the reasons of uncertainty that we discussed earlier is part of the reason gold's role as that catchall hedge is part of why a lot of this volatility is coming into gold.
And I think comparing, I mentioned gold's proved its worth, I think in terms of how it behaves as a sort of hedge or a perceived safe haven, especially versus cryptocurrencies, which obviously did not have the same type of impressive year as gold, I think those are some of the reasons why you're seeing gold, A, express this type of volatility in the market, but B, be driven by a lot of this uncertainty that's leading to some of these outcomes.
Now, in terms of the macroeconomic backdrop, I obviously have to keep abreast of what you are saying in your content, what our colleagues and rates and economics and FX and equity strategy are saying. These are all key drivers for gold. And so of course, I do think that uncertainty is one of the key defining and at times overriding factors at many points for gold markets. The macro backdrop does remain broadly gold positive. I think in terms of key drivers, particularly year-on-year looking to 2025, from gold's perspective it was largely a rates narrative. Looking into 2026, I think the baton has been passed over to the dollar, and it's become more of a dollar narrative in terms of the macroeconomic backdrop for gold.
And so, when you're thinking about the overall trends across these markets, and couple that with some of the macroeconomic concerns that some people have, this is adding up to a broadly gold positive backdrop. I think one unique part for gold in this particular environment is that gold can seemingly outperform both alongside equity market out-performance, or even in the event of some sort of selloff. Because you're seeing investors make increasing allocations to gold as a hedge, even as they layer into other risk on markets. And so, you're getting a sort of risk off benefits and a risk on environment, it seems, because of this uncertainty and these concerns out there.
In the event that you were to get some sort of selloff in another asset class, I do think gold would get true risk off flows, and that's potentially a reason for why gold could outperform our expectations at some point. But overall, it's hard to really find a driver that isn't in some ways, at least neutral or gold positive. And so, in this context, in this backdrop, when you couple that with uncertainty, you see the reasons for why gold is holding on to these levels, why we think that 4,500 to $5,000 ground range is a very healthy level for gold and potentially to build off from and through year end, and even higher, as we've mentioned.
And what it's leading to is increased inflows in investors when they're looking at the dollar backdrop and the broader macroeconomic backdrop, in 2025 that meant 650 tons of inflows, over 650 tons actually of inflows, into gold-backed exchange trade of products. That essentially wiped out for context four years of net outflows. And again, already this year we've seen about 50-ish tons of inflows, and so it's already a pretty strong year for gold holdings in investor terms.
And so , while our 2026 forecast, which is around 490 tons, maybe doesn't live up to 2025 levels, it's still a strong source of inflows coming from investors through looking at the macro landscape and the uncertainty out there, and layering into gold. And the central banks who, because of de-dollarization, diversification of their holdings, are also continuing to layer into gold markets. There's been headlines about certain central banks who have very transparent plans to increase their holdings. But even if we were to rewind the clock in the 2022 to 2024 period, data from the World Gold Council points to over a 1000 tons of net inflows from the official sector. This includes central banks and some of other official sector institutions.
In 2025, it looks like over 800 tons came in, and we forecast another 750 tons in '26 and a little bit more than that in '27. What this tells us, particularly when you compare it to a longer term average of about 600 to 650 tons, these are strong numbers. So you continue to see this inflow into the market from central banks, from investors, and that's really underpinning in a fundamental sense a lot of the pricing that we're seeing in the market. And so, when we look at gold and we look out through '26 and '27, while we try to take a relatively conservative view, given that we do think uncertainty, which is inherently uncertainty, is a key driver here, we do think the risk for gold is continuing to increase.
And regardless of that, the broader view among investors and landscape is that gold deserves a place in portfolios, and that's really what's playing out in terms of allocations to the space, whether they're driven by macro drivers, or the broader uncertainty or a combination of both, it's adding to this sort of cocktail seemingly perfect form for gold prices that's occurred over the last several years, and especially in '25 and seemingly again in '26. So it looks like for another good year for gold, even if we continue to get some of this volatility in the near term.
Jason Daw:
Okay, Chris, very insightful. Thank you for joining us today, and thank you to the audience for joining this edition of Macro Minutes. Gold by far is the most volatile asset class right now. The wild ride is probably not over. So if you have any follow-up questions, please contact myself or Chris directly, or via your RVC sales representative.
Speaker 3:
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