Gold, shares and metals hit new highs

2026 has begun as 2025 ended, with a strong rally in the prices of shares, copper and precious metals.

Investors are shrugging off geo-political uncertainty, continuing to view the market glass as half full. Events in Venezuela and Iran may have grabbed the headlines, but in market terms they have failed to take the shine off an ongoing melt-up in markets.

Meanwhile, growing anxiety about the independence of the Federal Reserve, has given a new boost to the gold price. With industrial metals also on a tear, and bonds dismissing the inflation threat, investors continue to scale the wall of worry.

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Fed back in the White House’s sights

Gold has rarely been out of the headlines over the past year or so. This week, it is back in focus thanks to an intensification of the battle between the White House and Federal Reserve.

The soured relationship between the President and the chair of the US central bank hit a new low this week as the Justice Department launched a criminal investigation into a $2.5bn renovation of the Fed’s Washington headquarters.

Fed chair Jerome Powell hit back in a video statement, dismissing the probe as nothing more than a pretext to rein in the Federal Reserve’s independence and a bid to force it into lowering interest rates.

President Trump has repeatedly attacked Powell for his reluctance to set interest rates at a level that would stoke economic growth. Powell insists that he has conducted monetary policy in a way that serves the US by keeping inflation in check. He is due to stand down in May and his successor is widely expected to be more aligned with the President’s wishes.

The price of gold, which tends to rise when investors are concerned about policy uncertainty and especially rising inflation, this week hit a new all-time high of $4,600. It has now almost trebled in the past three years.

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Equity melt-up

Investors may be concerned about the Fed’s independence. And they may be watching other geo-political events around the world with concern. But when it comes to their stock market investments, it’s as if there’s nothing at all to worry about.

Major markets around the world have continued to rise strongly in the first full week of 2026. More than two-thirds of global stocks are trading above their 200-day moving average. The S&P 500 closed out last week at a new all-time high of 6,966. The FTSE 100 stood at a new record high of 10,125.

The proportion of stocks in America outpacing their recent moving average has more than doubled to over 70%. But it’s a global phenomenon, too. European shares have risen twice as fast as Wall Street so far this year.

The main reason for the stock market rally should become clear in the next week or two. Earnings season looms once again with forecasts safely back in double digits after the tariff tantrum wobble in April.

Profits are growing at high levels as corporate earnings defy an apparent slowdown in the jobs market. One explanation for that could be that the AI revolution is finally trickling down into productivity benefits for the broader economy and not just the creators and providers of the new technology. Companies may be doing more with less, boosting profits even as jobs become harder to find for workers.

The broadening out of the benefits of AI comes at a crucial time for a market which has become worryingly concentrated. The so-called Nifty 50 - the top companies in the S&P 500 index - represent nearly two thirds of the benchmark’s total value. That is more than at previous market highs.

Importantly, however, the valuation gap between the top stocks and the rest of the market is much narrower than it was either in the 1970s or at the peak of the dot.com bubble 25 years ago. The rally looks better supported by earnings and valuations than it has in past bubbles.

Commodities upswing

Gold and shares are not the only assets enjoying a surge at the start of 2026. Industrial metals have also seen a sharp uptick to new record levels. In particular, copper has soared into uncharted territory as long-standing fundamental attractions are boosted by tariff-related technical issues.

The fundamental case for copper focuses on its use in many of the industries of the future, including clean energy, electric vehicles and the data centres that power the AI revolution. At the same time as demand is strong, supply has been hit by production shortages due to accidents and strikes around the world.

But the recent rally in the copper price to over $13,000 per metric tonne has also been fuelled by US trade policy. The threat of tariffs last year eased after an exemption was created for finished copper products. But a review of tariffs later this year has triggered pre-emptive stockpiling in the US and the transfer of copper to US warehouses, which has created shortages and high prices in Europe and Asia.

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Bonds stay calm

One of the biggest threats to the stock market rally could lie in the bond market. Fears about government policy and inflation have triggered a disconnect between falling interest rates and the yields on long-maturity bonds. This so-called steepening of the yield curve (low short rates, sticky long ones) threatens the equity market because it makes the income from bonds relatively attractive.

But for now, bonds remain well-behaved. The 10-year Treasury yield is closer to 4% than the 5% level that investors see as a danger zone for shares. For now, the market’s punch bowl remains full.

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