Perhaps you've heard Karine Polwart's stunning protest psalm, Cover Your Eyes, on the radio.

It's the one inspired by You've Been Trumped, Anthony Baxter's documentary about Scotland's Donald Trump experience. It's the one that is picturesque, personal and gorgeous. It could only have been written by Polwart.

With a tranche of BBC Folk Awards and an apprenticeship spanning The Battlefield Band and Malinky, Polwart's folk credentials are impeccable, but that's only part of the story. Her indie/pop collaborations include Chemikal Underground's Ballads Of The Book (alongside Idlewild and Norman Blake), Future Pilot AKA's Secrets From The Clockhouse (with Damo Suzuki and Thurston Moore) and The Fruit Tree Foundation's First Edition (which included members of Frightened Rabbit and The Twilight Sad) – not to mention her starring role in The Burns Unit with Emma Pollock and King Creosote. Her forthcoming fifth album, Traces, was produced by Iain Cook of alt-rock visionaries The Unwinding Hours.

Cover Your Eyes opens Traces, and its touchstones of love, loss and longing resound throughout an album of gentle memorial and subtle protest. "Other people do the angry rant really well, but it's not a thing that I'm very good at," offers the Banknock singer-songwriter. "The things that appeal to me tend to be more sleekit, a bit less literal, a bit more demanding of your attention – so that if you do get moved by something, you've been involved in the process, rather than having it forced upon you."

Since her acclaimed debut, Faultlines, in 2004, Polwart's take on music as social conduit has been stealthy and elegiac. "A lot of traditional folk lyrics are, generally speaking, quite direct – they tend to be bare bones, they're minimalist rather than poetic – whereas mine are deliberately a bit oblique," she says. "But then of course I write sleeve-notes to explain them all. On the one hand I want to be allusive, but on the other I don't want to be misunderstood."

Polwart's sleeve-notes for Traces are moving and enlightening. They unravel tales of family tragedy (Strange News), local horror (Half A Mile) and a symbolic ode for the Occupy Movement (King Of Birds). These narratives weave through deft musical landscapes thanks to producer Cook.

"I became aware of Iain through his band [Glasgow alt-rock cartographers] Aereogramme, on the Ballads Of The Book album – theirs was my favourite track," she says.

"Then they split up and became The Unwinding Hours, and I love their filmic sound, the depth of their arrangements, and I wondered how that sort of approach would work with my music. It wasn't that I wanted to sound like them – they're much more rocky and electronic, and my thing's essentially acoustic – but I was curious to see if their aesthetic would work with my instrumentation. You know, 'Can we take the accordion and have it play the role of a synth?'

"The first thing we sent Iain was Half A Mile" – a haunting number – "and I just loved what he did with it. It went to a place I never would have, especially in terms of percussion and rhythm, which is my musical weak point. It took on this real sense of intensity and drama."

Polwart has never wanted for melodic instinct, but Traces is an especially resilient offering. "Yeah, I wanted the music to do as much work as the lyrics this time – for the whole thing to stand up as a mood piece, even if you were listening to it as a foreign language," she says.

Polwart has bolstered her personal musical cache with Indian harmonium and percussion, while her regular trio – comprising her brother Steven (guitar) and Inge Thomson (accordion, percussion) – is enhanced by guest musicians, including Admiral Fallow's Sarah Hayes on flute. "The whole thing's been so liberating," Polwart says.

Among Traces' sticks and stones and contours, a standout aria, Tinsel Show, illuminates the Falkirk area where Polwart grew up: the celestial skyline of the Grangemouth refinery; the UFO folklore of The Bonnybridge Triangle.

Polwart laughs. "It's funny, because it's such an unassuming place, but I have a totally clear recollection of people at school saying they'd seen balls of fire in the sky at the Castlecary Arches, and cigar-shaped objects over Kilsyth, and there was that story about the guy who found a spaceship in the Polmont woods."

You wonder what impact those twin marvels – Grangemouth's otherworldly horizon and The Bonnybridge Triangle's alien mythology – have on the area's collective imagination.

"Yeah, I know – I was quite taken aback when I came to write that song," she nods. "I was due to do a gig with Alasdair Roberts and I was looking for some kind of premise that would connect me and Alasdair" – who hails from Kilmahog – "with another pal from Edinburgh. So I drew lines between where we'd all grown up, which made a triangle with Grangemouth in the middle. Then it just turned into this remembrance of what it was like." (The lyric tells it: "She sees stars and spells and Spangles/ sparklers in her hand/ and the eyes of ages watch our tinsel show.")

It's a wonderful, uplifting song, and further amplifies the district's brilliant, curious (and often quite radical) cultural output – from Arab Strap, Alan Bissett and Adam Stafford to Bill Wells and the Cocteau Twins. "I remember when I was at Denny High, the Cocteau Twins had such heroic status. We couldn't believe it – 'There are cool people from our area! They make cool music!'" Polwart laughs.

"It's been a nice one to sing out, Tinsel Show, because people really pick up on it," she continues. "You can go down to Bury St Edmunds and some man from Larbert will come up afterwards, delighted. Or I'll play it in a place that's got a similar power plant, like I played in Hull, and people were going, 'Woah!' It's got that same kind of resonance."

Traces inhabits such resonant settings, delineates such roots (and routes) and emotions. It's an understated yet remarkable album. Hold it tight, and listen close.

Traces is out via Hegri today. Karine Polwart plays Oran Mor, Glasgow, on September 19 and tours Scotland in November. See for details.