Gold Trend Shines Through Peaks and Valleys, on to Year Three

If you follow my work this will probably come as little surprise, but my top trade idea for 2026 is gold. While there’s been multiple turns in stocks and considerable grind in many major FX pairs considering the second half of 2025, where the USD held support and actually trended higher for much of the time even as the Fed pushed into rate cuts, the trend in gold over the past two years has been incredibly clean. And with the Fed expected to cut rates next year, and perhaps as many as three or four 25 bp cuts, the long side of gold can remain as attractive.

The linchpin to this entire argument is inflation, and if that does surprise to the upside the Fed could soon face little choice but to hike rates. But given the political pressure that a move of that nature would probably come with, combined with the fact that President Trump is set to nominate a new FOMC chair that will logically be more amenable to his rate cut demands, it seems little expectation for the Fed to moderate a dovish push unless absolutely need-be.

I think this argument can support the ‘melt up’ thesis in equities, as lower rates combined with fiscal expansion could produce a tailwind for corporate profits, and, in-turn, stock prices. This could make non-AI stocks as an attractive venue given the bifurcation that’s been seen across markets over the past few years, where AI names have benefited massively and non-AI names, not as much.

The challenge to this is just how entrenched that equity market rally is since the push off of the April 2025 lows; and, logically, there’s already a heavy long position that could produce headwinds from profit taking on continued breakout approaches. And if there are hints of higher inflation, which may compel a ‘less-dovish’ backdrop from the Fed, there could be rationale for pullbacks. Also couple this with the observation that since February of 2024, there have been a few different phases of weakness in equity markets, key of which was the episode from earlier in 2025 when the threat of tariffs combined with a Fed seemingly unwilling to entertain rate cuts produced a cautious backdrop the likes of which hadn’t really been seen since the Financial Collapse; and environment where both fiscal and monetary policy could be a hindrance to corporate profits and, in-turn, equity gains.

But it was the reconciliation of that in 2025 that really made the year, as Trump backing off of tariffs gave stocks their initial boost in April and May and then the pricing in of eventual rate cuts drove equities even higher in the latter-portion of the year.

Through it all, however, gold has held a consistent bullish trend with just three periods of digestion taking the form of bull pennants. The continuation patterns will often show after a prolonged run, and while that heavy one-sided positioning that can produce dramatic pullbacks, such as we saw in stocks in March and early-April of last year, when buyers come in to support higher-lows while responding to those lower prices, there remains a valid case for the original trend to continue. That’s what happened in the final two months of 2024, and then for four months in 2025 from April until August, and then again later in the year until the late-November breakout.

Gold Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Market Analyst, Global Macro