Bank J. Safra Sarasin: Geopolitical shift crucial to understanding gold's performance

April 13, 2026

_{This article was originally written in Dutch. This is an English translation.}

In an increasingly tense and fragmented geopolitical climate, investors are being forced to rethink assumptions that have formed the basis of portfolio construction for decades. Against this backdrop, gold has once again come to the fore. Not as a tactical investment, but as a strategic hedge against political and institutional risks. The historic threshold of $5,000 per ounce was recently broken. What does this mean?

By George Cotton, Portfolio Manager, Bank J. Safra Sarasin Ltd

Investors' refocusing on strategic certainties is reflected in market performance. Gold and the broader precious metals complex – such as silver and platinum – were among the standouts of 2025 and continued their rise in early 2026. Crucially, this movement is not driven by a single macroeconomic factor, such as inflation or growth, but by a broader erosion of confidence in political systems, the independence of central banks and geopolitical stability.

For George Cotton, Portfolio Manager at Bank J. Safra Sarasin, this shift is central to the renewed importance of gold. ‘Gold responds less to base scenarios for the economy and more to changes in so-called tail risks,’ he explains. ‘It moves when investors begin to question whether institutions are still capable of managing extreme scenarios.’

In a world characterised by escalation risks, trade conflicts and political unpredictability, gold's ability to operate outside national jurisdictions has become increasingly valuable.

An unprecedented geopolitical transition

Investors often look to history to interpret periods of stress, but the current US-led geopolitical climate is difficult to compare with other periods. While some see recent developments as a new phase of American withdrawal, Cotton argues that the current moment is structurally different.

‘We are in uncharted territory,’ he says. ‘From a geopolitical perspective, the best comparison may be the decline of the United Kingdom after the Second World War and the Suez Crisis, when imperial overstretch gave way to withdrawal and loss of strategic autonomy.’

Today, the US appears to be undergoing a similar recalibration, shifting its focus from Europe and parts of Asia to its own hemisphere. In this context, assets that transcend political boundaries are gaining in importance.

‘Gold is less tied to jurisdictions and much less susceptible to geopolitical weaponisation,’ Cotton notes, distinguishing it from financial assets that are increasingly entangled in sanctions and trade conflicts.

Pressure on the credibility of central banks

In addition to the geopolitical situation, growing doubts about institutional independence – particularly in the US – are also playing an important role in the strength of gold. The growing tension between the government and the central bank is leading to uncomfortable comparisons with emerging markets rather than developed economies.

‘When finance ministries and central banks fall into line to support populist measures, the inflationary flywheel often starts spinning faster,’ warns Cotton. ‘It is precisely this risk that is currently being priced into the gold market.’

Historical examples support this view. In several Latin American episodes, political pressure on central banks led to capital flight, currency weakness and stress in bond markets. In such circumstances, gold typically performed strongly in local currencies. At least, until strong policies restored market confidence.

What makes the current situation particularly dramatic is that similar dynamics are now visible at the heart of the global financial system.

Gold moves when investors begin to question whether institutions are still capable of managing extreme scenarios.

Markets, MAGA and pricing political shocks

In the short term, gold markets are extremely sensitive to political signals. Week after week, investors try to interpret where the focus of the Make America Great Again movement is shifting and what that means for trade policy, international relations and capital markets.

Recent events illustrate this sharply. Markets briefly relaxed after Donald Trump's speech at the World Economic Forum, in which he seemed to abandon military intervention to annex Greenland. Gold and silver took a break. A few days later, new threats of aggressive import tariffs on Canadian goods caused a renewed rise in precious metals. According to Cotton, this underlines the forward-looking nature of gold.

“Gold often anticipates trends,” he says. 'It reacts much more strongly to fluctuations in tail risk than to what most investors consider the base case scenario.

Gold as a canary in the coal mine

The debt crisis in the eurozone in the early 2010s provides a useful frame of reference. At the time, gold seemed to have everything going for it: government debt, weak growth and rising unemployment. Yet the price of gold peaked in mid-2011, well before the most severe economic consequences became apparent.

“What the gold market signalled early on was that the extreme risk was beginning to subside,” explains Cotton. “Although economic fundamentals were deteriorating, governments were no longer structurally behind the curve.”

As fiscal reforms and monetary policy began to take effect, confidence gradually returned and gold's role as a crisis hedge diminished. The lesson for investors today is clear, he says: gold responds primarily to confidence in institutional responses, not merely to economic weakness.

2026: stabilisation or escalation?

Looking ahead, the outlook for gold in 2026 will depend heavily on political developments in the US. With approval ratings falling and midterm elections approaching, investors are weighing up whether a policy shift is likely.

A repositioning of the Republican establishment could lead to a reduction in trade tariffs, improved international relations, a more stable dollar and downward pressure on gold prices. ‘That scenario would clearly be negative for gold,’ Cotton acknowledges.

At the same time, internal divisions within the administration complicate this outlook. ‘The fragmentation within Trump's inner circle has encouraged populist players to stick to the current course,’ he says, ‘leaving many of the positive drivers for gold intact.’

When bonds lose their safe-haven status

Finally, there is perhaps the most fundamental shift: the changing role of US government bonds. Whereas Treasuries were once considered the ultimate safe haven, they are increasingly behaving like assets that depend on political de-escalation rather than unconditional stability.

‘What remains,’ Cotton concludes, ‘is a world in which US bond markets function less as true safe havens and more as assets dependent on political outcomes, with gold acting as an overflow valve for capital seeking protection from the next conflict.’

Read the original article in Financial Investigator magazine