Daniel Ghali at TD Securities links gold to a “Hegemon trade”, based on views of US power and fiscal sustainability, and how these affect the US dollar’s store-of-value role. He says perceptions of power shape how foreign creditors, central banks, and wider markets judge the US ability to sustain its “exorbitant privilege”.
He describes last year’s “debasement trade” as most visible in precious metals, and says both themes connect to the dollar’s store-of-value function. He adds that geopolitical staying power is tied to confidence in the US capacity to defend this role.
Ghali says the current “currency defence” phase of the Iran war is bearish for gold while expectations of complete victory rise. He states this reduces gold buying as countries prioritise energy imports and economic and currency stabilisation over reserve diversification.
He says an end to currency defence, including through an unfavourable ceasefire, could drive the next leg of the gold bull market. He links this to faster reserve diversification towards gold, alongside attention on the US debt overhang.
The article was produced using an AI tool and reviewed by an editor.
Last year, in 2025, we saw the debasement narrative drive precious metals higher. Now, the market’s focus has clearly shifted to what we are calling the Hegemon trade, which links gold’s value directly to global perceptions of US power and its fiscal health. This trade is less about simple inflation and more about the dollar’s long-term role as a store of value.
Right now, the ongoing conflict in Iran is creating a headwind for gold, holding prices in a tight range. Nations involved are in a “currency defense” phase, prioritizing energy security and economic stability over adding to their gold reserves. Recent data from the World Gold Council shows a 15% dip in central bank gold purchases in Q1 2026 compared to the previous quarter, which seems to confirm this temporary shift in priorities.
For the immediate weeks, this suggests a bearish to neutral stance is warranted on gold futures. We see traders buying short-dated put options to hedge against a drop if a favorable ceasefire for the West materializes, which would strengthen the dollar. Implied volatility on near-term gold options has actually decreased to around 14%, suggesting the market is expecting stability, creating cheaper entry points for these protective positions.
However, the major opportunity lies in a potential breakdown of this currency defense. An unfavorable ceasefire agreement from the ongoing talks in Geneva, or any sign that the US is losing geopolitical influence, could be the catalyst for the next major bull market in gold. We saw a similar dynamic in the 1970s when declining faith in US economic stewardship led to a massive re-pricing of gold after the dollar was de-linked.
This is why we are positioning for a sharp upward move by purchasing longer-dated call options, specifically for the September and December 2026 contracts. The market is currently underpricing this geopolitical risk, focusing more on the Federal Reserve’s next move than the growing US debt-to-GDP ratio, which just crossed 125% according to the latest CBO projections. Should sentiment shift, these positions could see significant gains as nations rush to diversify their reserves away from US debt.
