Will gold still decline? 2026 Volatility Risks and Investment Decision Guide

What drives the gold bull market is never simply inflation or panic, but one or more long-term structural factors sufficient to shake the credibility of mainstream fiat currencies. When the market generally expects these core issues to be resolved or significantly eased, the monetary premium of gold diminishes, and the rally ends—that’s the key concern for investors: Will gold fall again? To answer this, we need to deeply understand the logic behind gold’s rise from around $2,000 at the start of 2024 to over $5,000 today.

Why is gold surging, and how big is the risk of a decline?

According to data from Reuters and Bloomberg, the gold price has increased over 30% in 2024-2025, reaching the highest level in nearly 30 years (surpassing 31% in 2007 and 29% in 2010). This bull run, starting from just over $2,000 in early 2024, is expected to surpass $5,000 by 2026, with a total increase of over 150%. As of late February, spot gold (XAU/USD) repeatedly hit new highs and now remains above $5,150–$5,200 per ounce, with no signs of weakening.

However, any asset that experiences abnormal gains carries the risk of correction. Gold’s historical volatility averages 19.4% annually, already higher than the S&P 500’s 14.7%, meaning that despite its seemingly invincible status, gold’s price swings can be quite intense. The question isn’t whether gold will fall, but under what conditions and how much it might decline.

Five structural factors supporting gold, and how sustainable are they?

The recent continuous rise in gold prices is mainly driven by five interconnected factors, forming a structural support rather than isolated events.

Persistent trade protectionism and tariff policies

This was the direct trigger for the 2025 surge in gold prices. A series of tariff policies increased market uncertainty, significantly boosting risk aversion and pushing gold higher. Historical experience (e.g., the US-China trade war in 2018) shows that during periods of policy uncertainty, gold prices often see short-term jumps of 5–10%. In 2026, the lingering effects of tariffs and ongoing regional trade frictions remain key variables supporting gold. But once policies clarify, this driving force will quickly fade.

Gradual decline in confidence in the US dollar

When market confidence in the dollar wanes, gold, as a dollar-denominated asset, benefits and attracts more capital inflows. In 2025–2026, expanding US fiscal deficits, debt ceiling disputes, and the de-dollarization trend lead funds to shift from dollar assets to hard assets. This isn’t a short-term phenomenon but a long-term structural change—also the deep reason behind the persistent central bank gold buying trend.

The dual-edged effect of Fed rate cut expectations

Fed rate cuts weaken the dollar, reducing the opportunity cost of holding gold, thus increasing its attractiveness. If the economy weakens, rate cuts could accelerate. Historically, each rate-cut cycle has seen significant gold price increases (e.g., 2008–2011, 2020–2022). Expectations of 1–2 more rate cuts in 2026 provide strong support for gold.

But this is a double-edged sword: if economic data unexpectedly strengthen, forcing the Fed to pause or delay rate cuts, market expectations for real interest rates will rise, directly undermining gold’s appeal. Historically, when rate cut expectations shift, gold has experienced rapid corrections of 10–15%.

Geopolitical risks

The ongoing Russia-Ukraine conflict, escalating Middle East tensions, and regional instability keep safe-haven demand high. Geopolitical events often trigger short-term spikes in gold prices. In 2025–2026, this factor remains, amplified by fragile global supply chains. However, geopolitical risks are uncertain—if tensions ease, this support will dissipate.

Sustained central bank gold accumulation

According to the World Gold Council (WGC), in 2025, global central banks net purchased over 1,200 tons of gold, marking the fourth consecutive year of net purchases exceeding 1,000 tons. Most surveyed central banks (76%) expect their gold holdings to “moderately or significantly increase” over the next five years, and many anticipate a decline in their dollar reserve ratios.

This appears highly bullish, but hidden risks exist: central bank buying capacity is limited; high purchase levels may lose economic advantage over time, and central banks’ motivation to buy could change due to domestic economic conditions. If signals of weakening buying emerge, market expectations could adjust sharply.

When might gold top out? Three triggers for corrections

Understanding the downside risks involves identifying three key triggers:

Rebound in real interest rates

If US inflation unexpectedly rises, forcing the Fed to delay rate cuts, or strong economic data lead to upward revisions of interest rate expectations, real interest rates could rise rapidly. High real rates sharply reduce gold’s appeal. In 2025, adjustments in Fed policy expectations caused a 10–15% correction; similar scenarios in 2026 could produce comparable declines.

Dissipation of crisis sentiment

If geopolitical tensions ease significantly or concerns over dollar credibility are alleviated, safe-haven premiums will evaporate quickly. Historically, when panic indicators normalize, gold often experiences rapid corrections of 5–20%.

Shift in central bank gold buying pace

This is the most long-term risk. If central banks slow or halt their gold purchases, it will break current market expectations and trigger chain reactions. While not an immediate concern for next year, it’s a risk to monitor closely over the next 2–3 years.

How to enter gold now and profit without losing?

After understanding the logic behind this gold rally and correction risks, the key is to choose strategies aligned with your risk tolerance.

For experienced short-term traders

Volatility offers excellent opportunities for short-term trading. Liquidity is high, and short-term direction is relatively easier to judge—especially during sharp surges or drops, where momentum is clear, and profit opportunities abound. Using tools like CME FedWatch to track the probability of rate cuts is effective—rising probabilities suggest gold may rise; declining probabilities hint at potential pullbacks.

For beginners aiming to catch recent swings

Remember: start small, test waters, and avoid blindly increasing positions. Gold’s average annual volatility of 19.4% means that emotional reactions can lead to significant losses. Be prepared for large swings and consider whether you can tolerate intense fluctuations.

For long-term physical gold investors

Gold’s cycle is very long. Buying as a store of value over 10+ years can pay off, but during that period, prices may double or halve. Physical gold has higher transaction costs (5–20%) that must be factored into returns. For Taiwanese investors, currency fluctuations (USD/TWD) also impact realized gains.

For portfolio allocation

Gold can be included, but don’t forget its volatility isn’t lower than stocks. Putting all your assets into gold isn’t wise; diversification remains the safer approach.

For maximizing returns

You can hold long-term while timing short-term trades during volatile periods, especially around US market data releases. This requires experience and risk management skills.

2026 gold price forecast: optimism and risks coexist

As time progresses, analyst views on gold’s future evolve. Most expect further gains driven by the same structural factors that fueled the bull market over the past two years.

Market consensus forecast

• 2026 average price: $5,200–$5,600 per ounce (many have raised previous estimates)
• Year-end target: typically $5,400–$5,800; more optimistic forecasts reach $6,000–$6,500
• Extreme high: some institutions (e.g., Société Générale, independent strategists) suggest potential for over $6,500 if geopolitical risks escalate or the dollar depreciates sharply

Major bank and institutional forecasts (2026)

• Goldman Sachs: raised year-end target from $5,400 to $5,700, citing ongoing central bank buying and declining real yields
• JPMorgan: expects $5,550 in Q4, driven by ETF inflows and safe-haven demand
• Citi: averages around $5,800 in H2, with risks of rising to $6,200 amid recession or high inflation
• UBS: conservative estimate of $5,300, but acknowledges risks of overestimation if rate cuts accelerate
• WGC / LBMA: current annual average price around $5,450, significantly higher than previous surveys

Note that these forecasts are based on “assumptions”—the continuation of current structural factors. Any major change could require adjustments.

Can gold truly preserve value? Systematic monitoring is more important than following trends

This gold bull market, driven by rate cuts, inflation, and geopolitical risks, fundamentally stems from cracks in the global credit system. Gold acts as a long-term hedge against systemic risks. Since the surge in central bank gold purchases began in 2022, the trend has not stopped, reflecting long-term doubts about the US dollar system.

In 2026, this trend is unlikely to vanish suddenly, as inflation remains sticky, debt pressures persist, and geopolitical tensions continue. Gold prices are increasingly supported at higher levels, with limited downside in bear markets and strong momentum in bull markets.

But it’s crucial to understand: gold’s rise is never linear. In 2025, expectations shifts caused a 10–15% correction; in 2026, real interest rate rebounds or crisis easing could cause similar volatility. The key isn’t predicting whether gold will fall but establishing a system to monitor the conditions that trigger declines, rather than blindly chasing news. Understanding the logic behind gold’s fluctuations allows you to find real opportunities amid the volatility.