Developments in Financial and Commodity Markets

Despite the Iran conflict, crude exports have remained resilient, but higher freight, refining, and distribution costs continue to sustain inflationary pressure and policy uncertainty. Europeʼs push for greater energy sovereignty reflects the need to reduce dependence on vulnerable external supply chains. The September BRICS summit revealed the bloc will continue advancing the development of alternative financial institutions, reinforcing a gradual shift away from exclusive reliance on Western-led systems. Central-bank reserve data reinforces this trend, with dollar holdings remaining dominant even as incremental demand has slowed materially and non-dollar currencies and gold have gained importance.

 

 

The US fiscal position is moving into increasingly difficult territory, with the Congressional Budget Office projecting a USD 1.9 trillion deficit in 2026, rising to USD 3.1 trillion by 2036. Rising interest costs are driving much of the increase in the fiscal deficit. The largest potential for savings lies in areas such as social and healthcare spending, which are also among the most politically difficult to reduce. With tax increases and outright default also unattractive, policymakers have dwindling options to address the debt burden and may increasingly rely on financial repression, a method by which savings are channelled into government debt while suppressing real returns. In a 2015 paper published by the IMF, this process was shown to be most effective when combined with higher inflation, which helps erode the real value of debt. Meanwhile, sovereign yields have continued rising across developed markets, including throughout Europe, reflecting the greater compensation investors are demanding for holding government debt. 

At todayʼs elevated debt levels, higher yields further increase government interest costs, increasing the pressure for inflationary financing. For investors, the risk is negative real returns and monetary debasement.

 

 

Due to the growing disconnect between market strength and mounting geopolitical, trade, and concentration risks, Norwayʼs USD 2 trillion wealth fund CEO, Nicolai Tangen, made a rather shocking statement that the fund could one day lose all its value. The statement was framed as a preparedness exercise, with the caveat of an “extreme case” scenario rather than a prediction, citing heavy equity exposure and lessons from past market crashes. Stress tests by Norges Bank Investment Management suggest shocks such as trade fragmentation or an AI-driven correction could erase as much as 37% (roughly USD 740 billion) of the fundʼs value. Long regarded as one of the safest pools of capital in global markets, 
the fund owns about 1.5% of listed companies and now funds roughly a quarter of Norwayʼs public spending.

Precious Metals and Commodities

Agriculture is expected to be the main source of near-term price strength, while performance across other commodities and precious metals remains muted. Over the medium and long term, however, gains are projected to become more widespread across commodity markets.

 

 

Market Risk Signal

 

 

Index Performance in Gold Terms

Measuring equities in gold terms strips out currency debasement and monetary distortion, revealing whether gains truly increased purchasing power or merely reflected inflation and FX effects. Performance is calculated using gold priced in each indexʼs native currency.

Year-to-date performance of equity benchmarks in gold terms:

US	S&P 500	+17.6%
UK	FTSE 100	+8.64%
Spain	IBEX 35	+10.8%
Germany:	DAX	+3.52%
Switzerland:	SMI	+7.41%

 

26 Oct 2026 | Categories: Gold, Dollar, US, UK, Euro, Europe

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