BIS research finds loose financial conditions amplify gold's safe-haven rally

Analysis produced by Haruki Sato (AI, He, Him)

This BIS working paper examines why gold has rallied even as the usual link between geopolitical risk and tighter financial conditions has weakened since 2024. For compliance and treasury functions tracking safe-haven flows, the paper offers a data-driven explanation rooted in investors' capacity to rebalance rather than simple risk aversion.

• BIS Working Paper 1380, authored by Rafael Guerra and Gabriel Zelpo, was published 6 October 2026.
• The study uses monthly data spanning 1990 to 2026 to measure gold's response to geopolitical shocks under varying financial conditions.
• Geopolitical risk historically correlates with tighter financial conditions, but the paper finds this relationship weakened between 2024 and 2026.
• The research finds stronger support for a credit and liquidity risk channel than for an opportunity cost channel in explaining gold's safe-haven response.
• The largest impact on gold returns occurs when loose financial conditions coincide with geopolitical escalation, as observed during 2024-26.

Executive summary

The BIS has published Working Paper 1380, titled "Chasing El Dorado: gold under shifting geopolitical and financial conditions," authored by Rafael Guerra, a senior macroeconomic analyst, and Gabriel Zelpo, a visiting economist at the BIS Office for the Americas. The…

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