The Zhitong Finance App learned that the World Gold Council published an article stating that the international political and economic landscape is undergoing an unprecedented profound transformation from unipolar dominance to multipolarization. With the development of global multipolarization, part of the world has entered the “law of the jungle,” and at a time when resources and politics are nationalized, as gold that is not issued by any country, has no sovereign credit risk, and has high liquidity, is undergoing a transformation from a traditional “safe-haven asset” and “strategic allocation”, and is gradually becoming a new base for the multipolar era.
Figure 1: Major Economies' Share of Global GDP (Purchasing Power Parity)
Source: Wande, World Gold Council
1. Gold is a strategic base during periods of frequent geopolitical risks
Since 2026, the global geopolitical situation has deteriorated further, and the Trump administration has successively taken military action against Venezuela and Iran. In fact, since the outbreak of the Russian-Ukrainian war in 2022, the world has entered a stage of high geopolitical risk. Looking at the longer cycle, 2022 may be an important turning point, marking the beginning of the third round of frequent geopolitical risks after the end of the Cold War.
Historical data also shows that geopolitical risk has obvious agglomeration characteristics, and once it enters a high-risk stage, it is often difficult to return to the long-term average in the short term. Looking back at history, every round of high geopolitical risk has been accompanied by a reshaping of the international order and power pattern. And as the world accelerates to multipolarization and strategic competition between East and West continues to deepen, the current round of global order restructuring and the geopolitical risks associated with it may continue longer than before.
Figure 2: Geopolitical Risk Index (monthly average) *
* Data as of June 2026.
Source: Wande, Geopolitical Risk (GPR) Index, World Gold Council
As a traditional safe-haven asset, the performance of gold in early 2026 puzzled many investors: why did the price of gold not continue to rise even though geopolitical risks heated up sharply; instead, there was a clear correction?
The association previously stated that gold prices experienced a rare rapid rise at the beginning of the year. Although expectations of the Fed's interest rate cuts and geopolitical risks form fundamental support, what really drove the price of gold to a new high in a short period of time was the massive inflow of gold ETFs and extremely popular positions in the options market — the market participation of retail investors is also constantly increasing. At the same time, news that the price of gold has repeatedly reached new highs continues to reinforce market optimism, further attracting institutional and individual investors to push higher.
However, as the conflict between the US, Israel, and Iran boosted oil prices and the risk of inflation, the market began to re-evaluate future interest rate paths, and global financial markets adjusted accordingly. The large number of crowded positions previously accumulated in the gold market began to be centrally closed: on the one hand, they were triggered by falling prices, and on the other hand, some investors sold gold assets to meet liquidity needs, which jointly drove the price of gold down sharply.
Looking back on previous trends, the sharp rise and fall in gold prices further reflects the rapid shift in investor sentiment from fanaticism to cooling down. However, judging from a longer historical perspective, the safe-haven properties of gold have not changed. In major geopolitical risk events, gold can still effectively cushion portfolio fluctuations and play an important risk hedging role when market pressure rises.
Figure 3: Average return for various types of assets at a time when the Geographic Risk Index soared *
* Based on WTI oil prices, LBMA midday gold prices, Bloomberg US Bond Index, Bloomberg US Dollar Index, Bloomberg Global Bond Index, Shanghai and Shenzhen 300 Index, MSCI US Stock Index and MSCI Global Stock Index, the average monthly performance of the top ten geopolitical risk index increases, respectively: September 2001 (9/11 incident), August 1990 (Iraq's invasion of Kuwait), March 2026 (US-Israel conflict), January 1991 (Gulf War begins), July 2005 (London 7/7 terrorist attack), October 2023 (Pakistan) Israel War), January 2020 (US-Iran conflict), May 1998 (South Asian nuclear crisis), August 1998 (US attack on Sudan and Afghanistan), March 2014 (Crimean War).
Source: Bloomberg, ICE Benchmarking Authority, World Gold Council
2. Gold does not require sovereign endorsement: global central banks continue to raise gold reserves
Since the Russian-Ukrainian conflict, the international financial and settlement system dominated by the US dollar has confirmed the tail risks caused by unilateral financial sanctions under an extreme geopolitical conflict pattern. The global South and emerging market countries are beginning to reassess the spillover effects of dependence on a single financial system and the liquidity and safety of reserve assets.
Central banks around the world have gradually become important buyers in the gold market. In 2025, the global central bank's net purchase of 848 tons was above its 10-year average of 681 tons for five consecutive years. According to the 2026 “Global Central Bank Gold Reserve Survey” release, 89% of central banks believe that the gold reserves of global central banks will increase in the next 12 months. Meanwhile, the share of central banks that think their own gold reserves will also increase in the next 12 months reached a record 45%.
Gold prices experienced phased revisions in the first half of the year, but demand for gold purchases by global central banks remained strong, reaching 345 tons, which is still above the 10-year average (317 tons). The central bank's asymmetric buying behavior of increasing purchases during the gold price correction phase not only reflects the central bank's urgent need for diversification of reserve assets and risk diversification, but also suggests an increase in the attractiveness of allocating gold at this stage. The central bank's act of continuing to increase the allocation of gold may help provide long-term support for gold prices, stabilize the long-term price center, and highlight the long-term strategic allocation value of gold.
Figure 4: Global central bank net purchases (quarterly)
Source: Metals Focus, World Gold Council
3. Providing long-term returns: Gold is an asset ballast stone in the long-term downward trend in interest rates
Currently, the domestic economy is undergoing kinetic energy conversion and structural adjustment. The economy declined somewhat in the second quarter compared to the previous quarter. The risk appetite of residents and the corporate sector was more cautious, and the in-depth adjustment of the real estate market is not over yet. In the first half of the year, loans to the residential sector continued to decline. Their active “deleveraging” behavior showed that consumption tendencies were still weak, and confidence would still take time to recover.
In order to support economic growth and promote the restoration of residents' confidence, China's loose monetary policy stance may not change in the short term. Furthermore, domestic interest rates may continue to decline for a long time, which will help reduce the opportunity cost of holding gold.
Figure 5: China's annual GDP and interest rate on China's 10-year treasury bonds (annual average) *
* The year-on-year GDP growth rate in 2020 and 2021 is the two-year average growth rate
Source: Wande, World Gold Council
In the long run, gold continues to provide investors with steady returns.
Throughout history, the compound annualized yield of RMB gold has reached 9% over the past 20 years, surpassing domestic stocks and bonds.
From the collapse of the Bretton Woods system in 1971 to June 2026, the annualized return on the dollar gold price reached 8.8%, surpassing the earnings of global stocks and bonds.
Figure 6: Annualized return on various assets*
* Based on the monthly Bloomberg Global Bond Index, China Securities Monetary Fund Index, China General Debt Index, MSCI Global Stock Index, Shanghai and Shenzhen 300 Index, and AU9999. The period starts in June 2006 and ends in June 2026.
Source: Wande, Shanghai Gold Exchange, Bloomberg, World Gold Council
4. Risk diversification: hedging the impact of systemic risk on equity and debt portfolios
Currently, the behavior of the residential sector with regard to wealth allocation is being adjusted, and some capital is being transferred from low-yield bank deposits to the capital market, and the trend is clear. While valuations in the equity market are being boosted, risks are slowly accumulating. Recently, the stock market is experiencing deep asset price pullbacks and revisions.
Historical experience shows that due to its low correlation with traditional risk assets such as stocks, bonds, and foreign exchange, gold often plays a role in hedging portfolio risk and stabilizing risk-adjusted returns when the market experiences significant fluctuations. Appropriately increasing the share of gold in asset allocation not only enriches wealth management channels, but also enhances the resilience of asset allocation during periods of market fluctuations.
Figure 7:50/50 domestic equity portfolio retracement and cumulative return on RMB gold during the retraction*
Source: Wande, Shanghai Gold Exchange, World Gold Council
summed
The intensification of geopolitical conflicts continues to increase the appeal of gold as a strategically allocated asset. The allocation of gold by central banks around the world highlights the importance of the international financial system getting rid of unilateral dependency and diversification of reserve assets. The allocation of gold has also provided the residential sector with a new path for wealth management and a new channel to reduce the overall risk of asset allocation.
The demand for wealth preservation and intergenerational transfers among high-net-worth individuals is increasing. Gold has a value storage function proven by rich historical experience, and can maintain actual purchasing power across the inflationary cycle. In times of economic and market turbulence, gold helps reduce the impact of market fluctuations on asset allocation. Its high liquidity and global consensus characteristics make it an important carrier of wealth transmission across sovereign borders.
As a new base in the multipolar era, gold provides long-term support for wealth preservation and wealth preservation through its scarcity, risk hedging properties, unsovereign credit risk, abundant liquidity, and high global recognition, and has become an important carrier and tool for family wealth value transmission and intergenerational transfer.