Despite a 15% rise in gold prices over the past year, Goldman Sachs’ investment strategy team remains skeptical about its role as a portfolio diversifier in 2026. The firm cautions that rising investor appetite for gold may be based on emotional rather than fundamental drivers.
- Gold posted a 15% gain over the past 12 months
- Gold ETFs attracted $18 billion in net inflows through January 2026
- Gold's average daily volatility rose to 2.1% in Q1 2026
- Gold has shown increased correlation with U.S. Treasury yields
- Goldman Sachs recommends capping gold exposure at 5% of portfolio allocations
- Gold's performance has lagged behind real yields and equities during economic expansion
Gold has surged 15% over the trailing 12 months, buoyed by geopolitical tensions and persistent inflation concerns, prompting widespread inflows into bullion-backed ETFs and physical holdings. Yet Goldman Sachs’ investment strategy team argues that this rally may not reflect sound long-term allocation logic. The firm’s analysis indicates that gold has underperformed relative to real yields and equities during periods of sustained economic growth, undermining its appeal as a risk hedge. The bank’s research highlights that gold’s correlation with U.S. Treasury yields has strengthened significantly since 2023, suggesting that its price movements are increasingly tied to macroeconomic expectations rather than independent safety demand. In the first quarter of 2026, gold’s average daily volatility spiked to 2.1%, compared to 1.3% for the S&P 500, signaling heightened sensitivity to rate policy shifts and market sentiment. As a result, Goldman advises clients to limit gold exposure to no more than 5% of total equity and fixed-income allocations, cautioning against overweight positions driven by fear-based behavior. This stance comes amid increasing flows into gold ETFs, which have seen $18 billion in net inflows through January 2026 — the highest monthly level since late 2022. The implications extend beyond individual portfolios. Rising gold demand could indirectly affect central bank balance sheets and sovereign debt dynamics, particularly in countries with large gold reserves. However, Goldman maintains that traditional assets like global equities and inflation-protected bonds offer better risk-adjusted returns for most investors seeking diversification.