The Opportunity Cost Problem

Gold’s core challenge in the current environment comes down to one word: yield. Or more precisely, the lack of it.

As central banks have been pushed toward tighter monetary policy — driven in part by supply-chain disruptions in the oil market stemming from ongoing conflict in the Middle East — the cost of holding a non-yielding asset like gold has risen sharply.

“Gold doesn’t return anything by way of a regular income stream,” De explained. “So what is the cost of holding a non-yielding asset? That is where things have dramatically shifted.”

When interest rates are low, investors sacrifice little by holding gold. When rates climb, every dollar allocated to gold carries a measurable opportunity cost measured against yield-bearing alternatives like Treasuries or money market funds. That calculus has turned against gold in the near term — at least on paper.

But De is careful to frame this as a cyclical headwind, not a permanent structural problem.

Gold Is Behaving Like a Financial Asset. That’s Not Entirely Bad.

Another dynamic reshaping the price behavior: its own success.

Gold’s rally earlier this year to an all-time high of $5,600 per ounce attracted a wave of capital from institutional and retail investors alike. That influx transformed gold’s trading characteristics — introducing sharper profit-taking cycles, greater sensitivity to broader market liquidity conditions, and behavior more typical of a financial asset than a traditional commodity refuge.

The practical result? When broader markets sell off and investors scramble for cash, gold gets sold alongside equities — which appears counterintuitive for an asset long marketed as a crisis hedge.

De notes, however, that gold’s recent decline has tracked broadly in line with global equities — meaning it is not underperforming in isolation. Rather, it is participating in a wider repricing across asset classes. That distinction matters for investors assessing whether their gold allocation is “working.”

Stagflation: The Scenario That Could Reignite Gold’s Safe-Haven Premium

Here is where De’s analysis gets particularly consequential for long-term investors.

Markets are increasingly pricing in a stagflationary environment — characterized by slowing economic growth running alongside persistent inflation. It is an environment central banks struggle to navigate, because the tools used to fight inflation (raising rates) tend to further suppress growth, and vice versa.

For portfolios, stagflation is among the most damaging macro environments. Traditional 60/40 stock-bond allocations tend to suffer, as both equities (hurt by slowing growth) and bonds (hurt by rising rates) come under pressure simultaneously.

Real assets — particularly commodities — historically have offered meaningful protection in such environments.

“Commodity markets are sending a clear signal of stagflationary risks,” De said, pointing to rising oil prices as an inflation signal and weakening copper prices as a warning about economic growth. “The moment you have heightened economic uncertainty… the payoffs to diversification increase.”

In that context, gold’s role as a defensive anchor — De’s term — becomes more compelling, not less. But she is also careful to note that in a stagflationary regime, gold is not the only commodity worth considering.

Beyond Gold: Energy, Industrial Metals, and the AI Transition

De’s broader portfolio message extends well past gold. In an environment of heightened uncertainty, she argues the case for commodities as a whole has strengthened — with different metals and energy assets offering distinct exposure to different macro risks.

Energy assets provide more direct inflation sensitivity. Industrial metals offer exposure to growth dynamics. And a new structural demand theme — the global build-out of artificial intelligence infrastructure and the accelerating green energy transition — is creating durable, long-term demand for a specific subset of resources.

“Any commodities that have a role to play in the AI transition or the green transition will probably continue to have tailwinds,” De said.

For investors building resilient portfolios in 2026 and beyond, that suggests a more nuanced commodity allocation — one in which gold serves as a foundational defensive layer, while other metals and energy assets contribute inflation sensitivity and growth exposure.

The Bottom Line for Investors

De’s analysis cuts through a lot of short-term noise to deliver a clear structural message: gold’s role as a portfolio diversifier and defensive anchor has not changed. What has changed is the environment in which it operates — and investors who fail to recognize that distinction risk making allocation decisions based on momentum rather than fundamentals.

In a world of widening economic outcomes, rising geopolitical risk, and growing stagflationary pressure, the long-term case for gold — and for real assets broadly — has arguably never been stronger.

The short-term price action may be uncomfortable. The long-term thesis remains intact.

Source: Kitco