BIS Study Finds Geopolitical Risks Boost Gold Returns, Especially During Loose Financial Conditions

Using monthly data from 1990 to 2026, the BIS study finds that increases in geopolitical risks—both threats and realized events—increase gold returns, with stronger effects observed during periods of loose financial conditions. The study suggests this relationship primarily operates through the credit and liquidity risk channel, indicating that investors' capacity to rebalance is a key factor. The largest impact occurs when loose financial conditions coincide with geopolitical escalations, as observed during 2024–26.