Advisors offer their outlooks for gold as inflation rises and central banks buy

Gold has not glittered lately despite the hottest inflation data in years and unyielding central bank buying. So what should advisors do with the yellow metal even when two of its biggest drivers can’t push it higher?

Headline PPI rose 1.1% in May, well above Wall Street’s 0.7% forecast, as revealed on Thursday. The inflation reading came a day after data from the U.S. Bureau of Labor Statistics showed that May’s CPI increased 4.2% over the last 12 months, up from 3.8% in April, hitting its highest level in three years.

One would think that such hot price data would spur gold higher considering its supposed role in portfolios as an inflation fighter. Nevertheless, that proved not to be the case as gold dipped slightly on the news, sliding to around $4,110 an ounce. For the record, gold is down 13% in the past month and off 6% year-to-date.

Steve Lowe, senior vice president & chief investment strategist at Thrivent, points out that gold has indeed helped hedge inflation over the long term, but in the short-to-intermediate term it can be volatile and may underperform inflation for extended periods. Once again, checking the record, gold has been on a pretty strong run over the longer term, rising 24% in the past 12 months and 119% over the last 5 years.

“Advisors should weigh several factors, including interest rate environment, geopolitical risk and central bank demand. Ultimately, advisors should see gold as playing a diversifying role, but portfolios should include a balanced mix of assets aligned to the client’s goals,” Lowe said.

Speaking of the rate environment, the 10-year Treasury yield has risen from around 4.17% to over 4.5% since the start of the year, which some advisors say is soaking up some of the demand and dollars from gold since the metal offers no income. And that particular income, by the way, could grow even more attractive if the Fed starts tightening later this year as many say it might.

The U.S. Treasury market also remains significantly more liquid and scalable than gold. Still, that’s not stopping central banks from adding to their gold holdings. The World Gold Council's 2026 survey shows that 43% of central banks plan to increase gold holdings this year, and 95% expect global gold reserves to continue growing over the next five years.

Thrivent’s Lowe believes a lot of this buying is due to geopolitical risk, as opposed to dollar devaluation risk, primarily from China and India.

“For advisors, the takeaway is not to reposition portfolios around a dollar replacement narrative, but to recognize gold’s role in a diversified portfolio. Over the long run, gold has functioned as an inflation hedge, but it can lag behind inflation for prolonged periods and is subject to cycles driven by rates and global uncertainty,” Lowe said.

Ted Neild, chief executive officer and chief investment officer at Gresham Partners, views recent central bank purchases as reserve diversification, not a signal that countries are preparing to return to a gold-backed monetary system. In his view, the freezing of Russian reserves likely reinforced the value of holding assets that sit outside another nation's financial system, and gold serves that purpose well.

“There is a meaningful difference between currency diversification and dollar abandonment. In our view, central banks are buying optionality, not rebuilding Bretton Woods. For advisors, the lesson isn't to follow central banks into gold, it's to recognize that gold can be one tool for managing monetary and geopolitical uncertainty within a broader portfolio,” Neild said.

Neild believes gold can provide protection against currency debasement, geopolitical shocks, and other forms of uncertainty. But it is also one of the most difficult assets to evaluate. Unlike stocks, bonds, or real estate, gold produces no cash flows.

“Its value is derived largely from the collective belief that it will continue to serve as a store of value.  For that reason, we view gold as a potential diversifier rather than a return driver. It can play a role in some portfolios, but it is only one of several ways to build resilience,” Neild said.

Finally, Dr. Preston D. Cherry, founder & wealth advisor at Concurrent Wealth, believes central banks are “voting” with their reserves, and that vote says no single nation's balance sheet gets unconditional trust anymore.

“This is not the end of the U.S. dollar or the U.S. Treasury market, but it does reflect growing concern around sovereign balance sheets, fiscal discipline, sanctions risk, policy unpredictability and geopolitical fragmentation. Gold does not have a government behind it. That is the point. When policy is unpredictable and sanctions can freeze your assets overnight, an asset with no issuer risk starts to look less like a relic and more like a foundation,” Dr. Cherry said.

For advisors, the takeaway is not to assume gold is replacing Treasuries inside client portfolios, according to Dr. Cherry. Treasuries still provide income, liquidity and duration exposure in ways gold does not. The better portfolio interpretation in his view is that gold can serve as a diversifier against institutional confidence risk, currency stress and policy uncertainty.

“It belongs in the conversation, but the allocation still has to be disciplined,” Dr. Cherry said.