Market commentary: Jan 2026

Portfolio performance

Overall returns continue for be steady both for the last 6 months and year led by the US share market. There is greater volatility with concerns over an AI bubble, but Federal Reserve interest rate cuts and strong corporate earnings have eased tensions. Infrastructure returns have also been strong as investors look for resilience in a potentially volatile market.

Gold in an uncertain world

Geopolitical uncertainty unleashed by US President Donald Trump has pushed up the price of gold. Tariff threats, uncertainty over the future of Greenland, ongoing wars, immigration tumult, worries over Federal Reserve independence, are making investors nervous. In times like these concerned investors move to gold. Why?

To answer this, it’s useful to understand the unique and longstanding role that gold plays in the global financial system.

Gold is widely seen as a store of value. It’s scarce and durable, and it has preserved its purchasing power over long periods of time. Gold is valuable in itself, unlike paper money which relies on trust in governments and central banks for its value (the paper itself has no value at all). Central banks hold gold as it has actual value and therefore supports and provides trust in the national currency.

In times of uncertainty, gold is seen as a safe haven asset because it has no default risk – it always has value.

Who’s buying? Central banks are the major buyers right now. They hold gold as part of their foreign currency reserves along with currencies like US dollars, Euros, Yen. Gold diversifies reserves away from this paper money and provides credibility and trust in the local currency. Speaking of trust, trust in the US dollar is significantly diminished and central banks are moving out of US dollars and into gold – some are calling this ‘dedollarising’ .

Investors (managed funds, pension funds, ETFs) and individual buyers are also buying gold for diversification and protection from share and bond market volatility.

The voice of the gold bulls is very loud at the moment, and the mood is that prices have further to rise. We seem to be bombarded online, on TV and on the radio with advertisements for gold bullion. This suggests there is some speculation at play.

We don’t have exposure to gold in client portfolios as the price is impossible to predict. The rapid rise in gold prices is not changing our investment approach. What we are responding to is overly optimistic market psychology and elevated prices. Asset allocation is more conservative, with less investment in shares and infrastructure, and has been for some time. We expect to move to a further conservative position soon.

Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFP^CM), Director and Financial Adviser