Gold had its best year since 1979 in 2025, a rally few predicted at the start of the year. For trend followers, who navigated a challenging first half as unpredictable policy shifts whipsawed signals, the yellow metal proved a key contributor to finishing the year in positive territory.
It has continued to shine in 2026, eclipsing US$5000 per ounce, as geopolitical tensions keep a bid under the metal. But if that tailwind, or other material drivers such as fiscal sustainability concerns and de-dollarisation, were to dissipate, a natural question that may arise is: will the trend peter out?
As we showed in this paper, periods of significant policy shifts tend to have unintended and unexpected consequences, driving greater market divergence and a more fertile environment for trend-following.
Digging for (the next) gold
Guessing where that divergence will manifest, and which markets will emerge as winners or losers, is a difficult, if not impossible, task. But trend following, diversified across a multitude of markets and asset classes and able to go long or short, may be able to even the odds. Rather than betting the house on a single outcome, the strategy is designed to capture trends wherever they emerge.
In June 2025, in the depths of one of trend following’s worst drawdown, we highlighted notable examples in history when trend following captured extended trends, including Euribor in 2022, as surging inflation led the ECB to hike rates, and cocoa in 2024, as a deepening supply crisis squeezed prices higher. The challenges in forecasting where the next trend may emerge highlights precisely why this diversification is key. In fact, at the time writing, we were in the midst of another manifesting: gold.
Our natural resources colleagues recently outlined the myriad of factors driving gold's sharp ascent in 2025: central bank purchasing, concerns around America's twin deficits, and persistent geopolitical flare-ups. That said, few would have predicted ex-ante that the non-yielding bullion would surpass a record US$4,000 and have it soar 65% on the year.
Trend followers built into long positions as the rally developed, capturing the ensuing gains. As Figure 1 shows, gold in 2025 was the second-most profitable single-market year for a traditional trend-following programme (targeting 10% volatility) since 2013, behind only Italian bonds in 2014 after ECB President Mario Draghi's famous "whatever it takes" speech. While a market’s attribution partly reflects its allocation, gold's diversification benefits and liquidity enable it to carry meaningful weight in a maximum diversification framework.
Figure 1. Top five cumulative market attributions by calendar year for a traditional trend-following programme since 2013
Source: Man Group database. Date range: Jan 2013 – Dec 2025. Past performance is not indicative of future returns. Any organisations, financial instruments or products mentioned are for reference purposes only and therefore, this material should not be construed as a recommendation for their purchase or sale.
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It is important to note that capturing profits from a trend isn’t as simple as just taking a binary long/short position in a market. While remaining patient, retaining conviction and being well-diversified are all essential components of a successful trend-following strategy, applying robust risk management is just as crucial. After all, trends typically don’t manifest as a smooth ride up or down, and by definition will eventually come to an end. Thus, the ability to capture profits must be underpinned by discipline to navigate changes in volatility both as the trend develops and as it inevitably reverses.
Figure 2. Rolling one-year annualised volatility of gold
Source: Man Group database. Date range: Jan 2022 to Dec 2025.
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As Figure 2 shows, gold volatility materially increased over 2025 from its medium-term average of approximately 11%, approaching an estimated 20% towards year-end. For static allocations, this meant the contribution of risk from gold proportionally increased, heightening its vulnerability to a potential price reversal. Trend following, conversely, can be nimble to changes in underlying market volatility, employing inverse volatility scaling (by reducing exposure as volatility spikes) to ensure that a single market does not drive a disproportionate level of risk. Another feature in certain (not all) trend signal implementations is the use of signal splines, which seeks to address the risks of a price reversal by tapering positions in the tails of the signal distribution. The combined effect of these mechanisms should be a more prudent capture of profits.
Gold may or may not keep running. But if history has taught us anything, it's that attempting to forecast this can be a futile exercise. The ‘next’ gold can come from any market and in any direction. Trend following's job is to be there when it does.
All data sourced from Bloomberg unless otherwise stated.
Authors: Yash Panjabi, Client Portfolio Manager at Man AHL and Max Buchanan, Client Portfolio Manager at Man AHL.
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