Gold prices surge and plummet, with a retracement of 26.8% this year, but the gold bull market is still ongoing.

As 2026 arrives, the gold market has staged a thrilling rollercoaster: London spot gold once reached a high of $5,598 per ounce, then experienced a cliff-like crash in March, with the largest single-day drop exceeding 8%, and the lowest dipping to about $4,099 per ounce, a total retracement of approximately 26.8%. Subsequently, it quickly rebounded, returning above $4,500 per ounce. Meanwhile, domestic prices for Shanghai Gold, Gold T+D, and jewelry stores like Chow Tai Fook also fluctuated accordingly.

The intense volatility has spread panic across the market, with many investors worried: Has the gold bull market come to an end? In fact, short-term rises and falls are merely phase reactions of market sentiment and capital battles; in the long run, the core logic supporting gold prices to rise has never changed.

△Image source: TuChong

This round of gold price plunge is not due to a fundamental reversal but results from the superposition of multiple short-term factors. Since March, disruptions in shipping through the Strait of Hormuz have pushed up international oil prices, reigniting concerns over global inflation. Subsequently, the Federal Reserve’s monetary policy meeting signaled a hawkish stance, reducing the full-year rate cut expectation to just once, leading to rising U.S. Treasury yields, a rebound in the dollar index, and an increase in real interest rates, directly suppressing the valuation of non-yielding assets like gold.

At the same time, a large amount of profit-taking accumulated from the previous sharp rise in gold prices, combined with the “cash is king” effect under global liquidity squeeze, prompted investors to sell gold first to raise funds. Coupled with the amplification effect of algorithmic trading, this ultimately triggered panic selling, causing gold prices to deviate sharply from fundamentals and fall significantly in the short term.

However, the rapid short-term correction in gold prices also clarifies the core logic behind the long-term rise of gold. The underlying factors supporting long-term upward movement have not disappeared due to short-term fluctuations.

First, the Federal Reserve’s easing stance remains unchanged; monetary policy continues to be the “switch” for gold price trends. Although the pace of rate cuts has been delayed, the U.S. national debt has already surpassed $38 trillion. Over the next 12 months, trillions of dollars in bonds will mature, significantly constraining further policy tightening. In the long run, interest rates are unlikely to stay high indefinitely, and easing remains the main trend; moreover, the negative correlation between gold and real interest rates also indicates strong upward momentum during rate-cut cycles.

Second, global central banks continue to buy gold, solidifying the bottom support for gold prices. According to the World Gold Council, central banks have been net buyers of gold for seven consecutive years (2019–2025), with a net purchase of 863 tons in 2025; as of the end of January 2026, China’s central bank has increased holdings for 15 consecutive months, and most other central banks plan to continue buying gold. This ongoing central bank buying creates a “bottom support” for gold prices, making deep declines unlikely even during short-term corrections.

△Image source: TuChong

Third, geopolitical risks and uncertainties continue to reinforce gold’s safe-haven attributes. Currently, spillover effects from conflicts involving the U.S., Iran, and Israel, as well as the stalemate in Russia-Ukraine, have shifted global geopolitical risks from “pulse-like” to “normalized.” In this environment, gold can hedge inflation risks and preserve value during economic downturns, consistently highlighting its role as a “safe harbor.”

Additionally, the supply-demand imbalance remains unchanged. On the supply side, global gold mine capacity expansion is limited, environmental regulations have slowed new supply, and the growth rate of gold supply continues to lag behind demand; on the demand side, domestic physical gold consumption is recovering, coupled with increased industrial use of gold in semiconductors, new energy, and other fields, forming a combined support from both supply and demand.

For investors, there is no need to be swept away by short-term volatility. Gold’s value has never been about short-term speculative gains but about its long-term property of preservation and hedging. The current “big rise—big fall—another big rise” pattern is essentially a contest between short-term sentiment and long-term logic. Short-term fluctuations are market corrections to overly crowded trades, not a reversal of the trend. The current price correction is more like a “deep squat” during an ascent, offering a rare opportunity for long-term allocation.

Reporter | Lu Yongzhi

Editor | Xi Ang

Operations | Song

Proofreading | Morning Morning

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