Gold Crushed Stocks This Year. Could the Rally Continue in 2026?
Over the past 50 years, the stock market has produced the highest average annual returns of any asset class. But that wasn't the case in 2025.
Instead, precious metals took the limelight, with gold gaining more than 64% amid heightened geopolitical unrest, a slowing U.S. economy, a weakened dollar and the Federal Reserve enacting an interest rate-cutting cycle. Those macroeconomic conditions resulted in aggressive central-bank buying while also fueling a frenzy in exchange-traded funds (ETFs) backed by physical gold.
At the same time, the S&P 500 gained 16.39% — above its historical average but significantly trailing gold — with four of the Magnificent Seven underperforming the benchmark index.
The result was the yellow metal setting more than 50 record highs this year as stocks came under pressure from concerns about historically high valuations and an emerging AI bubble.
Looking ahead to 2026, investors with exposure to gold may be in store for another strong year of gains, as many of the factors that drove the precious metal higher this year are likely to carry into next.
What's driving gold's bullish 2026 outlook
Much of gold's record performance this year can be attributable to what Peter Klein, founder and chief investment officer at ALINE Wealth Management, refers to as the three horsemen: persistent inflationary pressures, the precious metal's relative underperformance before 2025 and skyrocketing global debt.
Going forward, Klein says he is bullish on gold as fallout from escalating consumer prices continues. "I still believe that we're going to be somewhat surprised or saddled with this notion of sticky, second-wave inflation," he says, referring to an anticipated resurgence of rising prices.
That's something Fed Chairman Jerome Powell touched on in his comments following December's meeting after the central bank's third and final interest rate cut of 2025.
Inflation was mentioned a total of 79 times during the news conference, with Powell specifically attributing rising costs to President Donald Trump's trade policies.
"Inflation for goods has picked up, reflecting the effects of tariffs," he said. "In the near term, risks to inflation are tilted to the upside."
While expectations for additional interest rate cuts early in 2026 remain low, inflation could again serve as a catalyst for gold prices. When inflation erodes fiat currency's purchasing power, investors historically turn to the precious metal as a safe haven and a store of value.
That materialized in 2025 as the U.S. dollar was devalued by more than 10% from its year-to-date high on Jan. 13. From that date forward, the price of gold increased by 63%.
The surging popularity of ETFs, which reached record highs in assets under management in 2025, could also play a sizable role in gold's performance next year.
"The ETFs have been where the money's been going," Klein says. "Gold ETFs have soaked up a lot of demand." That demand was ninefold what is was the year prior, he adds.
Precious metal analysts cite ETF demand as one of the primary drivers of gold's price over the past year, and one they expect to continue into the new year. J.P. Morgan Global Research forecasts ongoing robust investor demand for gold, with around 250 tonnes (about 551,000 pounds) of inflows into ETFs expected in 2026.
Another driver for the precious metal — according to Gregory Shearer, head of Base and Precious Metals Strategy at J.P. Morgan — is ongoing central bank gold demand, which is expected to remain elevated next year as evidenced by strong buying in the third quarter of 2025 despite record-high gold prices.
Why investment banks are cautiously optimistic about gold
The general consensus is that gold is in line for another strong year. But Klein cautions investors to temper their expectations for gold's performance in 2026, pointing out that "gold has had a pretty good, a pretty heroic run [in 2025]."
His end-of-year price targets fall in the $4,800 to $4,900 range. Klein's estimate aligns with Goldman Sachs, which sees gold reaching $4,900 per troy ounce by the end of 2026, and Morgan Stanley's estimate of $4,800, with the latter citing strong Chinese retail demand, heightened central bank buying and global growth concerns as positive factors.
J.P. Morgan is more bullish.
"Gold demand will have enough firepower to continue to push prices toward $5,000 per [troy] ounce in 2026," Shearer said. That figure matches Bank of America's peak 2026 price target, which suggests 14.34% potential upside from today's price.
However, Shearer admits that estimate may be conservative, noting that J.P. Morgan has laid out a scenario based on foreign inflows into gold that would create enough new demand to drive prices to $6,000 per troy ounce, or 37.21% higher than the precious metal's current price.