As 2026 gets underway, metals and equities are telling two completely different stories. Late January saw the S&P 500 briefly push through 7,000, with investors still leaning into an artificial intelligence (AI)-led earnings narrative and expectations that policy will eventually become less restrictive. Volatility, however, remains remarkably subdued: the volatility index (VIX) has been hovering in the mid-teens – more elevated than its usual position during less volatile times but nowhere near levels that typically accompany genuine stress.
In this environment, metals are trading like insurance policies. Gold has leapt over the $5,500 mark, printing fresh record highs, silver has broken into triple digits, and copper has also joined the surge with new all-time highs. This divergence matters for clients because it suggests the “price” of metals is no longer set purely by manufacturing demand and mine supply but increasingly by balance-sheet decisions.
When a commodity becomes collateral, scarcity is about time
Gold’s 2025 rally wasn’t just large, it was telling. The metal ended the year up about 64%, with total demand at a record of 5,002 tonnes. The market wasn’t being pulled higher by jewellery demand; it was being pulled higher by asset allocation. Two related dynamics are doing the heavy lifting.
The first being “financialisation”: metals are increasingly held as reserves, collateral and strategic inventory. In 2025, investment demand (bars, coins and exchange traded funds or ETFs) surged, and ETF inflows resembled crisis-style allocation. Central banks continued accumulating gold at a hefty pace, well above pre-2022 norms, marginally below the peak years of 2022, 2023 and 2024.
The second factor is a time-horizon mismatch: the biggest buyers currently are those who can hold gold for years, while industrial players buy and use continuously. This mismatch is why metals prices can overshoot “fair value” from a manufacturing perspective and still keep climbing. It is because the current batch of buyers are thinking in decades, not quarters.
A newer wrinkle is the rise of private treasury accumulation. Some of the world’s largest stablecoin (a class of cryptocurrencies designed to maintain value by pegging to fiat currencies like the dollar) issuers have begun building physical gold reserves at scale, treating bullion as an evergreen balance-sheet asset. Fintech company, Tether, for example, said it added 27 tonnes in the fourth quarter of 2025 and holds about 130 tonnes of gold, buying roughly two tonnes per week and storing it in Switzerland. You don’t need this buyer to be bigger than central banks to change the market; you only need it to be persistent, well-funded, and relatively price insensitive. Whether one sees that as prudent diversification or a signal of distrust, the market impact is the same.
Supply is fragile – and slow to heal
Textbook economics assumes high prices increase supply. However, current pricing is not working with textbook theory. Copper’s latest leap isn’t happening because China suddenly doubled demand; it’s happening because the market is paying a rising “optionality premium” for secure supply in an uncertain world. Yesterday, 29 January 2026, flagged record copper prices amid geopolitical tensions, tariff noise, and a weaker dollar, with spot premiums in China actually signalling softer physical demand. That’s a key nuance. Prices can rise even when near-term spot demand is patchy if financial demand and supply anxiety dominate the narrative.
And supply anxiety is not theoretical. The world is sitting on a large refinancing wall and elevated policy risk, creating conditions where inventories and hard assets tend to be hoarded. Global debt reached nearly $346 trillion by the third quarter of 2025, about 310% of global gross domestic product, according to the Institute of International Finance, with sizeable redemptions (repayment of debt) ahead in both mature and emerging markets. In the United States (US), interest costs are now structurally heavy; the Committee for a Responsible Federal Budget has described trillion-dollar interest payments as “the new norm”. Add tariffs – where for example the Yale Budget Lab work puts the average effective tariff rate at around 25.3%, the highest level since 1909, and about 18.1% after substitution, its highest level since 1934 – and you find that metals are behaving like a referendum on policy credibility and supply-chain resilience, despite equities remaining buoyant.
The hidden casualty: demand destruction isn’t evenly shared
High prices don’t reduce demand uniformly. They reallocate it. Gold illustrates this clearly. As prices surged, jewellery demand fell – down 18% globally and 24% in China, particularly in price-sensitive markets – while investment demand rose. The “casualty” isn’t just lower volumes; it’s a shift from culturally embedded consumption to institutional accumulation.
Silver broke above $100/ounce as retail and momentum buying piled in, noting it was already up about 66% for January 2026, after a 147% surge in 2025. That’s bullish in the short run, but it raises the probability of sudden sharp drops if positioning becomes crowded.
For industry, the response is practical. When metal prices spike, manufacturers don’t simply absorb the cost. They thrift, redesign and substitute where standards allow. Over time, that can permanently reduce metal intensity per unit. Supercycles, like these, can plant the seeds of their own moderation, but only after margins have been squeezed and investment decisions delayed.
Key takeaways:
- Metals are signalling regime risk – policy uncertainty, debt dynamics, and geopolitical disruption – even as equities price a smoother path.
- Supply security has become a premium asset. Procurement, inventory strategy and hedging matter more when markets are driven by balance-sheet preference, not just consumption.
- Pay attention to the valuation-volatility mix. Elevated long-cycle equity valuations alongside complacent volatility can flip quickly if growth, tariffs or liquidity assumptions change.
- Base metals aren’t “just growth” anymore. Copper can rally hard even when near-term physical signals are mixed because the market is increasingly pricing in supply insecurity and strategic stockpiling.
The core takeaway is simple: this isn’t only a demand boom. It’s a clash between slow-to-expand supply and two types of buyers – one patient and balance-sheet driven, the other forced to buy on operational schedules. When those collide, prices can move far and fast, and the fallout tends to land first on the parts of the real economy with the least flexibility, and the most to lose.
A LOOK AT THE MARKETS
Week’s key themes:
- US Treasury yields climb on potential of a more hawkish fed
- Mixed earnings signals weigh on Wall Street
- Gold sees sharp retreat but set for its best month since 1980’s
- Rand retreats as metals dip and dollar recovers, but remains in the green for the week
Bonds
The 10-year US Treasury yield remains anchored above 4.25%, climbing to 4.27% this morning extending its weekly ascent as markets position for a potentially hawkish shift at the Fed. The Fed held rates steady, though two Federal Open Market Committee members – including Fed Governor, Christopher Waller, a potential candidate for Chair in May – voted for a 25-basis point cut. Markets still anticipate two reductions by year-end. US President, Donald Trump, indicated he would name his selection for Fed Chair today, with prediction markets favouring former Fed Governor, Kevin Warsh, over more dovish candidates including Governor Waller and BlackRock CIO, Rick Rieder.
In Germany, the 10-year Bund yield retreated to around 2.85% after approaching 10-month highs. European Central Bank (ECB) policymaker, Martin Kocher, cautioned that further euro strength could trigger renewed easing, lifting July cut probabilities to approximately 25%. The euro breached $1.20/€ for the first time since June 2021.
Turning to United Kingdom (UK) gilts; the 10-year gilt yield settled just above 4.55%, its highest level since late November. Fresh British Retail Consortium (BRC) data revealed accelerating price pressures, reinforcing sticky inflation concerns and limiting Bank of England (BoE) flexibility. However, sterling’s rally on broad dollar weakness may help temper imported inflation.
Locally, the 10-year yield slipped below 8% – its lowest level since March 2018. Yesterday, the South African Reserve Bank (SARB) held the repo rate at 6.75%, though markets expect at least 50 basis points of cuts in 2026. Improved fiscal health, reliable electricity, efficient logistics, and the stability of the Government of National Unity continue to attract investor interest.
Indices
Wall Street faced headwinds in early trade this morning, as futures slipped around 0.6%, weighed down by mixed earnings signals. Apple delivered strong earnings and revenue results – driven by robust iPhone demand – yet cautioned that rising costs are compressing margins. Its shares edged up 0.6% in after-hours trade. Multinational computer technology company, SanDisk rallied nearly 15% on upbeat guidance, while American capital equipment company, KLA Corp, tumbled over 8% after its gross margin outlook disappointed. Thursday’s session saw the Dow eke out a 0.11% gain, but the S&P 500 and Nasdaq retreated 0.13% and 0.72%, respectively. Microsoft’s roughly 10% plunge – triggered by slower cloud growth projections – dragged software names lower and reignited debate over AI spending versus returns. Focus now shifts to earnings from multinational oil and gas corporations, ExxonMobil and Chevron, financial services firm, American Express, and global telecommunications corporation, Verizon.
European bourses closed in the red amid a challenging earnings backdrop. The STOXX 50 shed 0.7% to settle at 5,892, while the broader STOXX 600 dipped 0.2% to 607. Global software giant, SAP, suffered its steepest single-day decline since 2020, plunging 16% after missing cloud revenue estimates and warning of decelerating backlog growth. Telecommunications company, Nokia, fell over 3%, and global semiconductor company, Infineon, lost nearly 4% on weakening AI infrastructure sentiment. On the upside, industrial technology corporation, ABB, surged 8.5% following strong results, and healthcare company, Roche, added 2.7% despite the Swiss franc’s headwinds.
The FTSE 100 bucked the European trend, gaining 0.2% to close at 10,172. Energy majors led the charge – Shell climbed 2.5% and BP added 1.5% – as US-Iran tensions supported crude prices. Mining heavyweights Rio Tinto, Anglo American, Glencore, and Antofagasta advanced between 0.5% and 2% on firm base metal demand. UK bank, Lloyds Banking Group, edged higher after announcing a £1.75 billion buyback alongside improved annual profits. Telecoms lagged.
The JSE All Share Index extended its impressive run, rising 0.14% to 125,249 – its weekly gain now stands at approximately 1.76%. The rally has been underpinned by soaring precious metals prices, with gold and platinum group metals miners enjoying strong tailwinds. Rand strength, around the R16.00/$ level – its firmest since 2022 – reflects improved risk sentiment. Year-on-year, the JSE All Share Index has surged 46.17%, supported by positive retail updates, including food and clothing retailer, Woolworths’ guidance for higher interim earnings.
Commodities
Brent slipped below $69/barrel but remains on course for its strongest monthly gain since July 2023. Geopolitical risk continues to underpin prices, with US-Iran tensions flaring after President Trump called for nuclear talks and Tehran issued warnings of retaliation. Market focus remains on potential disruption to shipping through the Strait of Hormuz. Earlier tailwinds included Venezuelan instability, Kazakh production outages, and tightening US restrictions on Russian oil purchases.
Bullion retreated below $5,200/ounce on profit-taking but is set to close January with gains exceeding 20% – its best monthly performance since the 1980s. The rally has been fuelled by persistent dollar weakness and elevated geopolitical uncertainty. President Trump’s executive order imposing tariffs on countries supplying oil to Cuba, combined with renewed threats against South Korea, added to safe-haven demand. His apparent tolerance for a weaker dollar has further supported the metal.
Silver pulled back roughly 4% toward $110/ounce after touching record highs, though it remains on track for a historic January gain of over 50% – its best month ever and ninth consecutive monthly advance. The rally reflects strong safe-haven flows, dollar depreciation, and a tight physical market, with both investment and industrial demand at record levels. Meanwhile copper futures tumbled more than 3% to around $6/₤ as investors booked profits across the metals complex. Despite the pullback, long-term demand expectations – driven by data centre expansion and electrification infrastructure – continue to support the structural outlook.
Currencies
The dollar index edged toward 96.5, recovering modestly but still tracking toward a second consecutive weekly loss. Investor confidence in the greenback has been rattled by policy uncertainty in Washington, including fresh tariff threats targeting countries that export oil to Cuba and warnings of potential military action against Iran. President Trump is expected to announce his Fed Chair nominee today with former Governor, Kevin Warsh – viewed as a hawkish choice – reportedly the frontrunner. A provisional deal to avert a government shutdown offered some relief, though the dollar remains near four-year lows after Trump signalled tolerance for currency weakness earlier this week, however Treasury Secretary, Scott Bessent, subsequently reaffirmed commitment to a strong dollar.
The euro retreated to $1.19/€, pulling back from levels not seen since June 2021, remaining in the green for the month, and up nearly 15% against the dollar year-on-year. Bessent’s comments dampened expectations of the US intervening in the currency markets, supporting the dollar’s end-of-week recovery. Meanwhile, ECB policymaker, Martin Kocher, cautioned that sustained euro strength could trigger renewed easing, lifting July rate cut expectations to around 25%. Next week’s ECB meeting is expected to deliver no change in interest rates.
The pound held firm above $1.38/£, near September 2021 highs. However, fresh BRC data revealing accelerating price pressures has reinforced concerns over sticky UK inflation, potentially constraining the BoE’s easing options. The pound remains nearly 2.2% up for the month.
The rand strengthened to around R15.64/$ earlier this week, before tracking weaker metals and a stronger dollar back towards the R15.80/$ mark. Yesterday, SARB kept interest rates unchanged, largely in line with market expectations, however, 75 basis points worth of cuts remain in scope by March 2027. The rand has gained nearly 5% year-to-date, buoyed by dollar weakness, surging precious metals and improving local fundamentals. Year-on-year the local currency has gained a staggering 15% against the greenback.
*Please note that all information is at the time of writing.
Key indicators:
USD/ZAR: 15.91
EUR/ZAR: 18.99
GBP/ZAR: 21.92
GOLD: $5,141.48
BRENT CRUDE: $68.56
Sources: Bloomberg, Investing.com, Reuters, Trading Economics and Trading View.
Written by: Citadel Advisory Partner and Citadel Global Director, Bianca Botes.