What gold says about the new world order

Emerging economies are rising in prominence in a new world order. Expanded trade routes, new cross-border settlement systems and rising demand for commodities are giving emerging nations room to assert their domestic interests and economic influence. This has an impact on financial assets, and gold’s sharp rise reflects the new forces at play. As US policies reshape trade flows and the importance of multilateral institutions wanes to the benefit of new regional ones, investors should assess the impacts on their portfolios.

Gold has continued its impressive rally with an 11% increase in the past month, lifting year-to-date gains to 58% - far outpacing most equity indices and financial assets. While the precious metal has also experienced sharp price swings, these bouts of volatility should not alter its broader direction or the underlying fundamentals. For some, this extraordinary rise is a story of the US dollar losing some of its value (dollar debasement). Gold certainly gains when the dollar depreciates. Constrained gold supply meeting broad-based and sustained gold buying by central banks and retail investors concerned about geopolitical tensions, US recession risks, the ongoing US-China trade war, or simply missing out on the latest move up in gold, adds to it. If some of these risks recede, a short-term retracement could follow, but we believe more fundamental shifts in international relations will continue to support gold prices. Our 12-month target remains USD 4,600 per ounce.

While gold has experienced sharp price swings, these bouts of volatility should not alter its broader direction or the underlying fundamentals

In our view, gold’s ascent reflects a deeper geopolitical reordering, with precious metals and other commodities playing a special role. Emerging economies – led by China, Russia, India, Brazil and South Africa – are asserting their own interests and improving their energy, food, and health security. Accelerated by US President Trump’s trade policies, the reduction of their dependence on developed markets is in motion. Alternative financial settlement systems and new logistics routes are deployed. This includes a trend by central banks in emerging economies to increasingly build gold reserves, to the detriment of US dollar assets. As key producers and refiners of critical and potentially scarce commodities, the influence of emerging economies in the global balance of power is rising.

As US policies reshape trade flows and the importance of multilateral institutions wanes to the benefit of new regional ones, investors should assess the impacts on their portfolios

A re-set of international relations

At the same time, the influence of post-World War Two multilateral organisations is waning. Signs of weakening US commitment to multinational institutions and treaties – from the Paris Agreement to the United Nations – and reduced financing are cause for sclerosis at existing organisations with either reform or new cooperation platforms the inevitable consequences. In both cases, emerging markets are claiming a bigger weight. The ongoing shift in dynamics is already having effects. The International Monetary Fund meetings in Washington still attract multilateral attendance but the World Economic Forum in Davos has recently seen fewer influential attendees. The BRICS+ grouping of countries – an intergovernmental organisation which now comprises ten countries ¹ – is the main platform of the Global South. More regional cooperation platforms are adding to the list as illustrated by the Asia-Pacific Economic cooperation, the Capital Markets Forum organised by the owners of Saudi Arabia’s stock exchange, the Global Leaders’ Meeting on Women in Beijing, and the Commonwealth of Independent States meetings in Central Asia to name but a few.

Trade rebalancing: old world consumers and new world producers

Chinese Premier Li Qiang’s announcement that his country will no longer seek access to Special and Differential Treatment in WTO agreements on the sidelines of the UN General Assembly in New York is significant. China’s status as the world’s main manufacturer and its technological advances in high value sectors are making the country a preferred source of goods not only for emerging markets, for which they are the biggest trading partner, but also for developed economies. China’s dominance in critical commodities like rare earths gives it new leverage in US and international trade negotiations. The US consumer remains the principal source of demand in the global economy, but as the world’s producer, China is enjoying increasing power.

The US consumer remains the principal source of demand in the global economy, but as the world’s producer, China is enjoying increasing power

Against this backdrop, trade routes and supply chains are being rewired. New trade routes are enabling more South-South trade. The International North-South Transport Corridor (INSTC), a multimodal network that uses a combination of sea, rail, and road transport connects ports like Mumbai in India, and Bandar Abbas in Iran, to rail networks in Russia, thanks to the Rasht-Astara railway, a key piece of infrastructure. The new Arctic sea-borne traffic Russia enables with its fleet of nuclear ice-breakers is also regarded as strategic for nations like India.

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An alternative financial system and settlement technology

Financial security and autonomy are crucial for emerging nations. In recent years, BRICs countries have accelerated the development of a new settlement system allowing cross border payments in local currencies supported by new technology, notably distributed ledger technology, and new monetary plumbing connecting emerging market central banks through bilateral swap lines. These efforts are not aimed at creating a common currency or adoption of the Chinese yuan as an alternative to the US dollar – they seek affordable, reliable and efficient financial settlements that facilitate South-South trade.

Nuclear deterrence

In a world of regional superpowers and without mutual security agreements, nuclear deterrence plays a bigger role in strategic competition. The call for more military spending in developed countries’ fiscal programmes has seen a defence sector investment trend rising. However, in many of these nations governments have little fiscal room for expensive and inefficient military purchases. If the need for defence spending remains urgent, Western firms could face the risk of nationalisation or direct state intervention to control pricing. That is because the Western defence industry is likely to face production capacity constraints, which in turn drives up short-term prices. In the short-term, these pressures raise profitability and stock prices, as we have seen in 2025. However, in the long-term, states may force through price caps on their military procurement processes. Nuclear deterrents, and hence enrichment programmes with both civil and potentially military objectives, offer a more compelling avenue for these states. Therefore, the nuclear industry might see a revival in the West and continued nuclear energy deployments in emerging markets.

It is worth highlighting however that existing efforts to invest in more robust defence have implications that go beyond military aspects. The pandemic and the Trump administration’s ‘America First’ strategies have underlined that Western economies’ defence spending plans need to be accompanied by wider investments. These range from industrial production, to logistics, digital infrastructure and technologies from raw materials to semiconductors. Such investments into infrastructure will have longer-term implications for economic growth and productivity.

Sustained commodity demand to benefit emerging market assets

In this context, demand for precious and industrial metals and rare earths is rising. Rare earths and their refinement technology, at the heart of the AI value chain, are dominated by China and the country is already using it to flex its trade muscle with the US. An alternative financial settlement system may also require emerging market central banks to hold higher gold reserves. This is to secure the use of bilateral swap lines which provide liquidity in local currencies, a prerequisite for bilateral trade payment. Global central bank gold reserves, at 18% of total holdings, are around half their pre-Bretton Woods levels. Emerging market central bank buying could meaningfully expand global demand for gold and provide structural support for gold prices as well as gold-mining nations. Uranium, the chemical element at the heart of the nuclear enrichment value chain, may see increased demand. There are many uranium producers globally, but uranium refinement technology is dominated by Russia.

An alternative financial settlement system may require emerging market central banks to hold higher gold reserves

Sustained demand for energy commodities – including oil and gas and solar energy – should provide emerging market utilities and energy producers, as well as the companies that have driven China’s solar technology dominance, with sustained sources of revenue in a technology-driven, energy-thirsty world.

For asset allocators, these global shifts point to a sustained boom in emerging market assets and a significant reassessment of their valuations over time. Thanks to their demographic advantages and economic scale, many emerging economies will increasingly assert their influence in the global economy and financial markets. We hold gold in our strategic asset allocations, and tactically increased our exposure to an overweight recently. We are also overweight in emerging market equities and emerging market hard currency debt. We will evaluate all our strategic asset allocation exposures and weightings in our annual strategic asset allocation review 2025 next month.