What gold’s surge really says about currency confidence
Gold’s inverse relationship with the US dollar remains a cornerstone of its appeal, but Thiago Duarte, market analyst at Axi, argues that correlations across asset classes are becoming more complex
29 January, 2026
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Gold has emerged as one of the strongest-performing assets heading into 2026, confounding expectations that its appeal would fade as markets stabilised. Rather than responding to short-term fear or isolated geopolitical shocks, the metal’s rally is increasingly being driven by deeper structural forces reshaping how investors think about currency risk, diversification, and portfolio resilience.
According to Thiago Duarte, market analyst at Axi, the current bull run is less about panic buying and more about eroding confidence in fiat systems.
“Gold’s strength is less about fear and more about trust or the lack of it,” Duarte said. “The rally reflects a structural repricing of currency risk rather than a simple reaction to inflation or geopolitics.”
With gold trading near $5,310, up almost 23 per cent year to date, and the US Dollar Index sliding toward 95.50, markets are sending a clear signal. “Investors are increasingly treating gold as a neutral reserve asset in a world where fiscal expansion, political uncertainty, and policy credibility are all being questioned simultaneously,” Duarte said.
Flows, volatility and positioning
While macro narratives often dominate headlines, Duarte noted that a significant portion of gold’s recent price acceleration has been driven by market structure and positioning.
“A significant portion of the recent acceleration has been flow-driven,” he said. “Futures and options positioning show gold has become a volatility instrument, particularly during sharp FX moves.”
Large options expiries around psychologically important levels, such as $5,000, have amplified short-term price behaviour. “That explains the sharp intraday swings without breaking the broader uptrend,” Duarte said.
Importantly, this dynamic does not undermine the longer-term case for gold. “This does not weaken the bull case, it explains why the move has been fast rather than fragile,” he said. “The structural demand remains intact as long as capital continues rotating away from duration-sensitive assets.”
For institutional investors, this distinction matters. A rally driven by flows and volatility can appear unstable on the surface, but when aligned with structural capital rotation, it can prove more durable than traditional macro-driven moves.
Retail participation typically increases during periods of heightened uncertainty, raising concerns about whether gold rallies are becoming crowded or overheated. Duarte believes the most reliable signals lie in behaviour, not sentiment.
“The key signals are behavioural, not emotional,” he said. “In a healthy bull market, gold should remain resilient during equity pullbacks and should not fully retrace during short-term dollar rebounds.”
Another important indicator is how the market digests gains. “When gold pauses at higher levels rather than sharply correcting, it suggests absorption by longer-term holders,” Duarte said.
Volatility patterns also offer insight. “Volatility compression after spikes is also constructive,” he said. “It shows speculative excess is being worked off without damaging the trend.”
These characteristics point to a market that is consolidating strength rather than preparing for reversal — a dynamic more consistent with institutional accumulation than retail-driven spikes.
Read: Gold blasts past $5,000: Is the $6,000 milestone next?
Shifting correlations and portfolio implications
Gold’s inverse relationship with the US dollar remains a cornerstone of its appeal, but Duarte argues that correlations across asset classes are becoming more complex.
“Gold’s inverse relationship with the dollar remains intact, but its relationship with risk assets has become more nuanced,” he said.
In environments where dollar weakness reflects confidence erosion rather than growth optimism, gold and equities can move higher together. “During periods where dollar weakness is driven by credibility concerns rather than growth optimism, gold and equities can rise together,” Duarte said. “This is a powerful diversification dynamic.”
For investors in globally exposed regions such as the Middle East, this evolution is particularly relevant. “Gold is increasingly acting as both a hedge and a portfolio stabiliser rather than a simple crisis asset,” he said.
This shift has implications for asset allocation frameworks that traditionally viewed gold as a binary hedge. Instead, it is increasingly being positioned as a strategic reserve asset with asymmetric risk properties.
Risks on both sides of the trade
Despite gold’s strong momentum, Duarte cautioned that investors should remain mindful of both upside catalysts and downside risks.
“On the upside, a deeper dollar breakdown, renewed geopolitical stress, or a shift toward looser financial conditions could accelerate flows into precious metals,” he said.
He also pointed to broader speculative appetite across the metals complex. “Silver’s 64 per cent year-to-date rise suggests speculative appetite is broadening, not fading,” Duarte said.
The principal risk, however, lies in volatility itself. “The main downside risk is volatility itself,” he said. “Crowded positioning and leverage can trigger sharp pullbacks around major macro events or option expiries.”
Such corrections, while potentially severe, may not alter the underlying trend. “These corrections are likely to be violent but temporary,” Duarte said.
From a structural perspective, gold’s role appears to be evolving rather than peaking. “Structurally, gold’s role in portfolios is strengthening, which means pullbacks are increasingly being treated as opportunities rather than exit signals,” he said.
Taken together, the dynamics underpinning gold’s rally suggest a shift in how the metal is being used by investors. Rather than serving purely as a reflexive hedge against crisis, gold is increasingly functioning as a neutral store of value amid growing scepticism toward fiat stability and policy credibility.
For institutional allocators, the message is clear: gold’s current bull run is not just about fear, it is about structure, flows, and a rethinking of what constitutes safety in a fragmented global financial system.
