(Kitco News) – Gold is behaving more like a risk asset in 2026, selling off sharply amid heightened geopolitical tensions and a stronger dollar, but the de-dollarization trend still makes it a good long-term investment, according to commodity analysts at HSBC.
"Moves in the gold price since the Iran conflict broke out have defied expectations,” the HSBC Asset Management analysts wrote. “The conventional playbook assumed that mounting geopolitical tensions and economic uncertainty would naturally boost the yellow metal, mirroring last year’s ‘Liberation Day’ episode and sustaining a spectacular two-year rally.”
Instead, the yellow metal has done the opposite, they noted, losing 15% to date in March.
“A stronger US dollar has certainly been a headwind, deterring non-US buyers, while a hawkish repricing of interest rates has increased the opportunity cost of holding a non-yielding asset,” the analysts said. “Yet, gold withstood a similar surge in the greenback and rates throughout 2022, weakening this traditional thesis.”
HSBC believes gold is actually behaving like a risk asset in 2026. “Ownership has shifted towards retail and other leveraged buyers, many of whom are forced to liquidate holdings in periods of market stress,” they noted.
"There remains a decent long-term investment case for gold, particularly amid ongoing global de-dollarisation,” the analysts said. “However, the recent volatility offers a stark reminder: robust portfolio diversification demands a broad-based approach."
On Feb. 15, James Steel, Chief Precious Metals Analyst at HSBC, said volatility will define the precious metals market in 2026 as Fed policy and U.S. dollar exposure continue to shape demand.
In an interview with CNBC, Steel was asked about why gold doesn’t appear to be reacting to the decline in the U.S. 10-year Treasury yield, which has plunged from 4.30% all the way down to 4.00% in just a few days.
“You've put your head on the nail there,” he said. “The change happened in 2022. Before that, if you looked at the real rate on the 10-year – that's the 10-year minus inflation – it had a beautiful inverse correlation with gold, going right back to the end of Bretton Woods, when the gold came off the dollar exchange.”
Steel said that the relationship has broken down completely in recent years. “Gold is not as sensitive to real rates, particularly on the 10-year, as it used to be,” he said. “And that's also when we got a lot of retail buying in the market, elevated geopolitical risks, and also central bank buying.”
“I'm not saying that relationship won't go back,” he added. “But it is not as strong as it used to be, for sure.”
Steel was then asked if the nomination of Kevin Warsh could be related to the more recent trend of rates declining without gold prices rising due to his expressed desire to reduce the Fed’s balance sheet.
“In the case of the Fed, as long as the Fed maintains [their independence] – which I believe it will – as long as the central bank is independent,” he said. “That's the key point there. Any threat to that raises the gold price.”
Steel was also asked how much of gold’s elevated price he believed was a reflection of its role as a debasement hedge.
“In the case of debasement, we don't quite look at it like that,” he replied. “We believe that the dollar will remain the world's reserve currency for the foreseeable future, and by that we mean for a very long time to come. But that's not to say, for example, that every central bank may need as many dollars as it has… One of the ways you can reduce your dollar exposure is to buy gold.”
“I think that's been an important element in central bank buying, which since 2022 has been two, two and a half, sometimes three times more than the previous 10-year averages.”
Steel also shared his view on the apparent absence of money rotating into EMEA countries or into gold as the AI sector continues its shakeup of the broader equity markets.
“It has done, up until recently,” he said. “The market's made remarkable gains in the past couple of years. Just to put it in context, the [earlier longstanding] high was $850 in January of 1980, and when we went above that.”
“You heard a lot of talk about gold hitting new highs,” Steel continued. “I always prefer to look at it in real terms, in inflation-adjusted terms. Now, in today's money, that's about $3,400 or so, and we broke above that in April. Gold has made a series of new highs, and the fact that it hasn't jumped up recently, I don't think deters the bull market necessarily.”
“Don't forget, we've had a lot of new money come into the market, and we've had a parabolic rally in January,” Steel said. “When a market goes up like this, it really invites volatility. I think that's going to be the benchmark word for this year – volatility – in gold.”
“Just because it's a safe haven, and just because it's a quality asset, doesn't mean it's not volatile.”
