Gold demand will drop this year even as supply increases, but average price will still rise 43% in 2026 – Metals Focus

Metals Focus forecasts gold prices to surge 43% in 2026 to a record $4,920 an ounce, even as total gold demand is expected to decline. Weakness in jewelry and central bank buying is projected to be offset by stronger investor demand for bars and coins, which would become the largest demand segment for the first time. Mine production and recycling are both expected to grow modestly, pointing to a tighter but still expanding supply backdrop.

Analysis

Gold is entering a regime where the marginal buyer is shifting from prestige consumption to financial hoarding. That matters because bars/coins are more price-elastic and more momentum-sensitive than jewelry, so upside can self-reinforce through retail flows even if headline demand is softer. The second-order effect is that high prices may not immediately choke demand; they can actually validate the inflation/FX-debasement trade and prolong the bid longer than many expect.

The bigger loser is the jewelry ecosystem, especially mid-tier fabricators and retailers in markets where gold is both adornment and savings. Expect substitution into lighter-weight pieces, lower karat content, and non-gold alternatives, which compresses margins even before unit volumes fall. On the supply side, modest mine growth means the industry still cannot solve higher prices with meaningful incremental output, so any downside in price likely needs forced selling or a macro shock rather than normal production response.

The main catalyst set is real yields and dollar direction over the next 1-6 months. A sustained rise in real rates or a sharp risk-off deleveraging event would pressure gold quickly, but that would likely require a disinflationary growth scare or policy surprise. The contrarian point is that consensus may be underestimating how much of this move is already a positioning/credibility trade; if ETF and retail inflows crowd in late, upside could continue, but volatility will widen and drawdowns on any hawkish repricing will be abrupt.

Key Decisions for Investors

• Go long GC gold futures or GLD on a 1-3 month horizon, using pullbacks rather than breakouts; risk/reward favors continuation as long as real yields are stable to lower, with a tight stop if the 10-year TIPS yield reclaims recent highs.
• Pair trade: long gold exposure (GLD/GC) versus short a broad consumer discretionary basket with jewelry exposure over 3-6 months; the trade captures margin compression and demand substitution if luxury pricing stays elevated.
• Sell out-of-the-money GLD puts or structure put spreads for income if implied volatility stays elevated; the thesis is that upside is supported by flow, while downside is cushioned by strong investor demand unless real rates spike.
• Avoid chasing bullion-heavy miners into strength; instead prefer a lagged entry in quality producers only after the gold price consolidates, because equities can de-rate if price gains are driven by sentiment rather than margin expansion.