‘Quiet-Quitting’ of US assets fuels new gold bets in emerging markets

Emerging market assets and precious metals are extending a stormy start to 2026 as tensions between the US and Europe weigh on the dollar and revive diversification flows around the world.The MSCI Emerging Markets Equity Index rose for a second day on Friday, posting a fifth straight week of gains – its longest winning streak since May. The gauge is up about 7% this year, better than the S&P 500’s gain of about 1%. Asian technology stocks have supported the rally, while Latin American stocks have led the way, up about 1.3% on Friday and nearly 14% so far this year.

Risk sentiment got a boost after China’s central bank set the yuan’s daily benchmark interest rate above the level of 7 per dollar for the first time in more than two years, signaling tolerance for the currency’s rally. The South African stock benchmark was looking for its third consecutive weekly rally as gold traded just below $5,000 an ounce.

Investors are pouring money into emerging market funds at a record pace as momentum grows for a rotation out of US investments. It has sent the emerging market stock index to a record high.

While Asian tech stocks fueled the rally, other regions are now catching up. The emerging Europe, Middle East and Africa benchmark rose on all five days this week and is on track for its best month since 2020. The MSCI EM Latin America stock index closed Thursday at its highest level since 2018 and rose another 1.3% on Friday, for a weekly gain of 7.6%.

The Greenland struggle – even if it has been softened for now – has revived questions about American exceptionalism and the role of the dollar, spurring funds from Europe to India to diversify away from government bonds. This flow has fueled a rebound in emerging markets, fueled by robust global growth, the boom in AI spending and political shifts in Latin America, as well as orthodox fiscal and monetary policies in much of the developing world.

People “want to diversify away from U.S. assets, and I would describe it a little bit like quietly getting out of U.S. bonds,” said Katie Koch, CEO of TCW Group Inc. in a Bloomberg Television interview. “I don’t think there will be a massive announcement, I just think they will look for opportunities to diversify.” Currencies such as the Brazilian real and the Colombian and Chilean pesos have risen more than 3% this year. Meanwhile, the world’s largest buyer of gold, the National Bank of Poland, approved plans on Tuesday to buy another 150 tonnes of the precious metal.The $135 billion iShares Core MSCI Emerging Markets ETF, which invests in emerging market stocks, raised more than $6.5 billion in January. That puts the country on track for the largest monthly inflow since its founding in 2012.

“Emerging market activity is one of the key beneficiaries of stronger global growth,” Oliver Harvey, a strategist at Deutsche Bank in London, wrote in a note. “And with opportunities to express a positive growth view in developed markets limited, the outlook for emerging markets is even more optimistic.”

To be fair, the pace of money flows into emerging markets may slow due to geopolitical tensions, as developing countries’ asset stocks are not as deep as those of the US. With a combined value of nearly $36 trillion, emerging markets represent about half of the $73 trillion U.S. market.

“That said, the themes of de-dollarization and fiscal profligacy are back,” they wrote. “De-dollarization has the potential to positively impact emerging market risk premia, as was the case in 2025.”