Mint Explainer: Why Trump's Venezuela shock is fueling gold, not crude
US action in Venezuela has revived fears over geopolitics, sovereignty, and the safety of paper reserves. While oil prices remain constrained by supply realities, gold is increasingly pricing in a more fragmented and coercive global order.
MUMBAI : Gold has started 2026 on a firm note, rising nearly 2% in the first five sessions, as markets absorb the geopolitical shock triggered by US military action in Venezuela.
The US military's capture of Venezuelan President Nicolás Maduro on charges ranging from drug smuggling to electoral subversion has injected fresh uncertainty into global markets, lifting gold prices while pushing oil marginally lower.
Since Venezuela holds the world’s largest oil reserves—about 303 billion barrels—crude initially drew market attention. Oil prices, however, have remained muted amid weak demand and existing supply overhangs. Gold, by contrast, has reacted more strongly, with analysts saying the fresh uncertainty has added momentum to its bull run.
Will the US gain control over Venezuela’s gold?
Venezuela holds meaningful official gold reserves, estimated at around 160 tonnes, alongside vast untapped mineral resources. While experts say the US is unlikely to gain direct control over these assets in the near term, Donald Trump's move strengthens the case for gold as a strategic reserve.
The US action accelerates de-dollarization trends that intensified after the Russia-Ukraine war, when Russian dollar-denominated assets were frozen by Western powers, said Anindya Banerjee, head of currency and commodity research at Kotak Securities Ltd.
“Since then, trust in the dollar as a neutral reserve currency has eroded," Banerjee said. “Fragmented power centres are increasingly prioritizing real assets over paper guarantees."
The US move, he added, fractures an already multipolar world further, reinforcing incentives for central banks, particularly in emerging and non-aligned economies, to diversify reserves away from the dollar and towards gold.
Is gold now pricing ‘precedent risk’?
The bigger question for markets is whether this episode marks a shift in how gold is priced. Harsh Gupta Madhusudan, fund manager of Ionic Asset’s PIPE Fund, argued that gold has evolved over the past five years from a simple inflation hedge into a broader geopolitical risk barometer.
That shift was already visible in 2025, when gold delivered a staggering 75% return, driven by central bank buying, currency diversification, and persistent geopolitical stress, well before the Venezuela episode added fresh momentum.
“Trump’s Venezuela move sets a precedent for how future flashpoints, such as China-Taiwan, might be handled," Gupta said. “Even if broader markets remain calm, gold responds to the idea that sovereign assets and regimes can be restructured through force."
Banerjee of Kotak Securities echoed that concern, noting that Trump’s rhetoric stretches beyond Venezuela to include suggestions of buying Greenland and recalibrating policy towards Cuba.
He warned the US’s apparent willingness to flout established norms could embolden other powers to assert regional dominance, as well. In such a world, gold increasingly functions as a sovereign-neutral asset, one that sits outside political alliances and sanctions frameworks, he added.
Why do lower oil prices matter for gold?
Ironically, the Venezuela shock has reinforced a bearish setup for oil, rather than tightening it. The Organization of the Petroleum Exporting Countries and its allies (Opec+) is widely expected to maintain steady output at its upcoming meeting, suggesting Venezuela-related disruptions are unlikely to materially tighten oil markets, said Banerjee.
In fact, the balance of risks points the other way. “If US involvement eventually adds more Venezuelan supply to an already oversupplied market, crude prices could remain under pressure, reinforcing a disinflationary backdrop," Banerjee added.
A softer oil environment feeds directly into gold’s bullish setup. Lower energy prices ease inflation pressures in the US, strengthening expectations of Federal Reserve rate cuts. Banerjee noted that any moderation in inflation would revive monetary easing expectations, a classic tailwind for gold.
Gupta of Ionic Asset added that Trump also faces political incentives to keep borrowing costs low ahead of the US mid-term elections later in 2026. “Lower oil prices, a dovish Fed, and fiscally expansive policy together increase the dollar's weakening risks," he said, reinforcing gold’s long-term appeal.
What about equities?
Equity markets, by contrast, have adopted a more cautious but measured tone. Benchmark Nifty 50 briefly touched a fresh record high of 26,373 on Monday before profit-taking set in, with energy, oil and gas, and infrastructure stocks under pressure. The broader mood remains guarded rather than panicked.
Gupta said the anxiety stems less from Venezuela itself and more from the uncertainty it creates around global trade negotiations, including the timing and contours of a potential US-India trade deal. Markets are also awaiting clarity from the third-quarter earnings and the Union budget in February, which could help anchor expectations.
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