June 24, 2026 | Emerging Markets Debt
Senior Corporate Credit and Sustainability Analyst
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Gold has experienced an unusual period of weakness despite heightened geopolitical tensions and ongoing global uncertainty. While higher real yields and shifting investor positioning have weighed on prices in the near term, we believe the structural drivers of gold demand remain intact. Continued central-bank buying, reserve diversification, and concerns about fiscal sustainability and geopolitical fragmentation support a constructive medium-term outlook for the metal and reinforce its role as a strategic asset within EMs.
Gold has underperformed notably year-to-date, a surprising outcome given the elevated geopolitical tensions that have historically supported the metal. The conflict in the Middle East triggered an energy supply shock that sent oil prices sharply higher, fueling inflation expectations and, in turn, leading investors to price in higher interest rates.
A hawkish tone from Fed officials raised the opportunity cost of holding a non-yielding asset such as gold.
We saw gold’s inverse correlation with real yields—a relationship that had largely broken down between 2023 and 2025—reassert itself. This dynamic was reinforced by an increasingly hawkish tone from U.S. Federal Reserve (Fed) officials, which raised the opportunity cost of holding a non-yielding asset such as gold.
Adding to the pressure, investor positioning was elevated heading into the conflict following gold’s more than 100% rally since early 2025, leaving the market vulnerable to profit-taking. In March, central banks also turned net sellers of gold as some countries drew on reserves to support their currencies and address balance-of-payments pressures. This marked a notable departure from the sustained central-bank buying that had supported gold prices in recent years, despite already elevated valuations. Turkey and India were among the countries that used gold reserves to help stabilize their currencies.
Despite the recent weakness, we remain constructive on gold over the medium term. Central banks quickly returned to net buying in April, underscoring the resilience of underlying demand despite the energy-driven supply shock. Poland led purchases, while China recorded its largest monthly addition since December 2024, extending its buying streak to 18 consecutive months. The Czech Republic also continued accumulating reserves, marking its 38th consecutive month of purchases.
We believe these purchases reflect a structural reserve diversification trend rather than opportunistic trading. In our view, gold demonstrated its value as an insurance asset in March: it was sufficiently liquid to be sold when needed, which is precisely what effective insurance is designed to do.
The Fed signaling a clearer easing path could provide a meaningful tailwind for gold.
While the debasement trade has moderated this year, the forces underpinning it remain intact. Fiscal deficits continue to expand across the Group of Seven (G7), geopolitical fragmentation is deepening, and the precedent established by the freezing of sovereign assets in 2022 has not been reversed. At the same time, exchange-traded fund (ETF) participation and speculative positioning remain subdued relative to early-2026 levels. Should the Fed begin signaling a clearer easing path, these sources of demand could reengage and provide a meaningful tailwind for gold.
Lastly, gold’s increasing strategic importance is evident in the way countries are positioning themselves around the metal. Indonesia is fostering a domestic downstream gold industry through export policies, Singapore is reinforcing its status as a regional vaulting and clearing hub, and China continues to invest in exchange infrastructure and storage capacity. Taken together, these developments suggest that policymakers increasingly view gold as a growing component of the global monetary system rather than a relic of the past.
Gold prices remain above the 90th percentile of the industry cost curve, leaving nearly all producers profitable and supporting expansion plans, stronger balance sheets, and improving credit profiles.
We believe EM gold miners are particularly well positioned.
We believe EM gold miners are particularly well positioned. Most operate in the lower half of the global cost curve, allowing them to generate stronger margins and cash flows than many DM peers at current gold prices.
In addition, EM producers may be better insulated from inflationary pressures tied to higher oil prices. In risk-off environments, local currency depreciation can help offset rising input costs, while many DM producers face higher structural costs and stronger commodity-linked currencies.
Alexandra Symeonidi, CFA, is a senior corporate credit and sustainability analyst on William Blair’s emerging markets debt team.
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