Geopolitics has reasserted itself as a core driver of markets over the past few years, not as a background risk but as an active force shaping asset allocation decisions. The post–cold war assumption that globalisation would steadily dampen political risk has been decisively overturned. Instead, investors are operating in a world defined by strategic rivalry, fragmented supply chains, regional conflicts and an increasing willingness by governments to weaponise trade, capital flows and currencies.

From the war in Ukraine to persistent tensions in the Middle East, from US–China decoupling to the growing use of tariffs and sanctions, geopolitics has injected a layer of uncertainty that markets cannot ignore.

This shift has had profound implications for portfolio construction. Traditional diversification models, which were built on the assumption that equities, bonds and currencies respond primarily to economic cycles and central bank policy, have been repeatedly stress-tested by geopolitical shocks.

Energy prices have spiked on conflict headlines, supply chains have been disrupted by political decisions rather than natural bottlenecks, and fiscal policy has become more unpredictable as governments prioritise security and strategic autonomy over budget discipline. As a result, investors have increasingly sought assets that can act as insurance against political error, not just economic slowdown.

Investors have increasingly sought assets that can act as insurance against political error, not just economic slowdown

It is in this environment that gold has reclaimed a central role in asset allocation. Over the past two years, private banks and wealth managers have not simply tolerated gold exposure; they have actively recommended it.

Risk immunity

This has marked a clear break from the post-2010 era, when gold was often treated as a tactical hedge or an ideological holding rather than a strategic allocation. The rationale for this shift is not hard to identify. Gold has offered something increasingly scarce in modern portfolios: an asset that is no one else’s liability, immune to default risk, sanctions, capital controls and political interference.

Crucially, the case for gold has extended well beyond short-term fear trades. Central banks, particularly in emerging markets, have been aggressive buyers, seeking to reduce reliance on the US dollar and insulate reserves from geopolitical pressure. At the same time, persistent fiscal deficits in developed economies and the politicisation of monetary policy have undermined confidence in fiat currencies as long-term stores of value.

Even as inflation has moderated from its peaks, the credibility cost of the inflation shock has lingered. Gold has benefited not from panic, but from a slow erosion of trust in the institutional framework underpinning global finance.

Private banks and wealth managers have recognised this shift. Gold allocations have increasingly been framed not as a bet on crisis, but as a structural hedge against regime change, monetary, fiscal and geopolitical risk.

Importantly, gold has also performed its traditional role as a diversifier at precisely the moments investors needed it most. During periods of equity volatility, bond market stress or currency weakness, gold has repeatedly demonstrated its value as portfolio ballast. That consistency has reinforced the conviction that gold deserves a permanent seat at the table, rather than a fleeting tactical role.

Strategic competition

The more contentious question is whether this logic still holds going forward. In my view, it does. The geopolitical environment that drove gold’s renaissance has not stabilised; if anything, it has become more entrenched.

Strategic competition between major powers is now a defining feature of the global order, not a temporary phase. Defence spending is rising, trade barriers are being normalised, and fiscal discipline remains subordinate to political priorities.

Gold now functions as a hedge against uncertainty itself, particularly the kind that cannot be modelled easily or hedged cheaply through traditional instruments

Even if inflation continues to cool, the probability of policy mistakes, either through excessive easing, fiscal dominance or geopolitical escalation, remains elevated. Gold thrives in precisely that environment.

Moreover, gold’s appeal is no longer dependent on collapsing real yields or imminent financial crisis. Its role has evolved. It now functions as a hedge against uncertainty itself, particularly the kind that cannot be modelled easily or hedged cheaply through traditional instruments.

For wealth managers tasked with preserving capital across generations, that argument remains compelling. While short-term price corrections are inevitable, the strategic case for holding gold appears as strong today as it did two years ago, if not stronger.

Silver linings

Silver, meanwhile, offers a complementary but distinct opportunity. While often grouped with gold, silver occupies a more complex space as both a precious metal and an industrial input. That dual identity gives silver greater volatility, but also greater optionality.

On the one hand, silver tends to benefit from the same geopolitical and monetary forces that support gold. On the other, it is increasingly tied to structural demand from the energy transition, electronics and advanced manufacturing. This creates a powerful asymmetry: in risk-off environments, silver can follow gold higher; in growth-driven or reflationary phases, industrial demand can provide an additional tailwind.

For investors willing to tolerate higher volatility, silver can act as a leveraged expression of the same themes underpinning gold allocations. It is more sensitive to shifts in sentiment and liquidity, but that sensitivity can work in its favour when geopolitical risk, supply constraints or renewed inflation fears resurface. Importantly, silver remains under-owned relative to gold, leaving scope for catch-up flows if investor demand broadens beyond pure safe haven assets.

So, to summarise, in a world where uncertainty is structural, not cyclical, precious metals remain one of the few assets designed not to predict the future, but to survive it.

 

Daniela Hathorn, senior market analyst at Capital.com, a trading and investing platform