XAU ETF Exposure Still Too Low, Leaving Scope for Gold to Exceed $4,900 by 2026
Gold extended its upward momentum this week, closing at $4,300.57 per ounce on Friday, up 0.6% on the week and continuing its steady recovery from early December lows near $4,200. Despite the strong performance, analysts argue the rally may still have significant room to run, with meaningful upside risks to end-2026 forecasts that place gold around $4,900 per ounce.
According to Morgan Stanley, investor positioning in gold remains surprisingly light, particularly among U.S.-based investors. Western gold ETF holdings are broadly consistent with levels implied by interest rates alone, but they do not yet reflect a broader shift toward diversification or hedging against fiscal pressures and monetary debasement.
An analysis of U.S. regulatory filings shows that fewer than half of major asset managers currently have any exposure to gold ETFs. Even among those that do, the average allocation is just 0.22%, underscoring how underrepresented gold remains in institutional portfolios. Morgan Stanley notes that client discussions increasingly suggest long-term allocators are beginning to reassess gold’s role as a strategic portfolio diversifier rather than merely a short-term tactical trade.
If this reassessment leads to even modest increases in allocations, the potential price impact could be significant. Given the relatively small size of the investable gold market, incremental demand from large asset managers could push prices meaningfully higher. In this scenario, Morgan Stanley sees scope for gold to move beyond $4,900 per ounce by the end of 2026, even without a major shift in interest rates or inflation.
Importantly, gold ETFs currently represent just 0.17% of U.S. private financial portfolios, defined as equities and bonds. This remains well below the peak reached in 2012, highlighting how much room there may still be for increased investor participation despite years of strong gold performance.
