(Mike Maharrey, Money Metals News Service) Gold is going to become increasingly important as the deglobalization and de-dollarization trend that took off last year continues to gain steam, according to a recent report published by Sprott.
What do we mean by “deglobalization?”
As Sprott described it, it’s the impact of a breakdown in post-WWII alliances, erosion of political and military norms, and an upending of foundational assumptions underpinning currencies and commodities.
“Deglobalization has become a structural transformation and reversal of the market trends of the past several decades, which will define market behavior for years to come.”
This will drive persistent inflation, elevated geopolitical risk premiums, and asset revaluation, including precious metals and “critical minerals.”
Sprott analysts Paul Wong and Jacob White say this growing disorder will accelerate de-dollarization, with gold increasingly filling the gap.
“Gold is gaining prominence as the globally accepted neutral reserve asset, reinforcing its role as a hedge against systemic risk and geopolitical uncertainty. The global debasement further amplifies the demand for gold.”
In an interview with Kitco News, Wong said that even as political alliances fragment and shift, power blocks will continue to trade with each other. Gold will play a key role as the global economy reorients.
“There’s still going to be investments, capital flows. That’s part of the reason why gold is so attractive to any power block, is that it acts as the neutral reserve currency, meaning that it’s a reference price. If you want to trade between block A and block B, there is a reference value, a neutral reserve value that everyone can agree on – or so far, they seem to be agreeing on.”
Central bank gold buying reflects the growing importance of the yellow metal in the quickly evolving global economy.
Last year was the fourth-largest expansion of central bank gold reserves on record. The all-time high was set in 2022 (1,136 tonnes). It was the highest level of net purchases on record, dating back to 1950, including since the suspension of dollar convertibility into gold in 1971. We also saw central bank purchases eclipse 1,000 tonnes in 2023 and 2024. To put that into context, the annual average for 2010-2021 was 473 tonnes.
The Sprott report notes the growing debasement trade with investors rotating out of “fiat-denominated assets and into stores of value such as gold, other precious metals, and select commodities.”
“A year ago, the debasement trade was outside of the mainstream, but it has evolved into a structural allocation theme.”
This is due to growing worries about global debt and surging inflation. The Sprott report argues that “the pandemic-era policy mix of greater debt, deficits and stimulus has entrenched fiscal dominance as a structural regime.”
“In this environment, government spending dictates monetary policy, and central banks increasingly prioritize debt sustainability over inflation control. This dynamic underpins the debasement trade, a secular shift toward hard assets as fiat currencies rapidly lose purchasing power.”
Due to the Debt Black Hole, Sprott believes central banks will adopt a “run-it-hot” monetary policy, choosing inflation over a potential economic meltdown.
“The combination of fiscal dominance and monetary accommodation sets the stage for a reflationary impulse in 2026. Traditional hedges lose efficacy as policy deliberately undermines real returns. In this environment, precious metals, real assets, commodities and inflation-linked instruments become favorable allocations in a world where policy-driven liquidity becomes a primary driver of asset prices.”
The Sprott analysts say they think “the debasement trade is likely to accelerate, reinforcing the strategic case for hard assets in institutional portfolios.”
They also take aim at the notion that gold is overbought. Wong and White concede it looks that way, but the yellow metal remains underinvested. Central bank buying laid the foundation for the current gold market, but a lot of investors still haven’t hopped on the bandwagon.
“If you pull the chart, your first thought is, ‘Man, this thing really looks overbought.’ Then you go around, you ask investors and most investment funds, and they’re thinking, ‘Boy, I wish I could own a little bit more.’ And that’s the issue. It’s literally come to the point now where there aren’t really any sellers of any real size or duration, and there’s a large set of buyers underneath it all, and the trends just keep building and reinforcing the [price] action.”
The tide seems to be turning, especially after Morgan Stanley CIO Michael Wilson said investors should consider abandoning the traditional 60/40 equity/bond portfolio allocation and adopt a 60/20/20 distribution with 20 percent allocated to precious metals.
On average, most Western investors (institutional and private) hold less than 1 percent of gold in their portfolios. If investors take even modest steps toward that allocation, it will add significant demand to the equation, further increasing upward price pressure.
Given the evolving economic and market dynamics, Sprott analysts say gold is positioned to shine.
“In a world of competing currency blocs, persistent deficits, and policy codependence, gold stands as a globally accepted store of value. While gold’s 2026 price action may not match its remarkable 2025 rally, the risk skew remains to the upside, particularly under renewed liquidity waves or geopolitical shocks. While price charts may indicate overbought conditions, gold remains under-owned among most investors.”
Wong summed it up with a rhetorical question.
“What’s the best bearish argument on gold? The fact it’s gone up too much? To me, that’s not a great argument.”
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
