Q2 Gold Price Outlook: How Much Longer Will the Volatility Continue?

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◎ Reporter Zeng Qingyi

After reaching a historical intraday high of 5,600 USD per ounce, with a daily trading range of over 10%, the pricing logic has been switching back and forth… Looking back at the first quarter of 2026, the gold market saw a rare “roller-coaster”行情, with March’s relentless “sell-off” once giving back all of this year’s gains since the start of the year, but by the last day of the quarter, the gold price surged rapidly again. On April 1, London spot gold extended its upward move, returning to above 4,700 USD per ounce.

Looking ahead to the second quarter, experts believe that, in the short term, after a surge in oil prices triggered by an escalation of the geopolitical conflict in the Middle East, the resulting strength in the U.S. dollar is exerting downward pressure, leading gold prices to show clear signs of being weighed on. In the second quarter, gold’s price action will mainly be characterized by consolidation, base-building, and range-bound repairs. In addition, don’t overestimate the momentum behind global central banks buying gold.

From historical peaks to almost giving back the year-to-date gains

In the first quarter of 2026, gold prices at elevated levels experienced a “roller-coaster”行情 that went from a strong climb to a sharp drop.

Taking London spot gold as an example, gold price action in the first quarter of 2026 can be divided into three stages: The first stage is from early January to January 28, when the price continued rising,逼近 a record high and nearing 5,600 USD per ounce; the second stage is from January 29 to March 2, when gold saw extreme volatility—on January 30, the intraday decline exceeded 9%, and the next day the intraday low broke below 4,400 USD per ounce, before later rising to above 5,400 USD per ounce on March 2; the third stage is from March 3 to the end of March, when gold trended downward and even briefly fell below the 4,100 USD per ounce level.

Wind data shows that as of March 31 Beijing time, both London spot gold and COMEX (New York Commodity Exchange) gold futures were up only about 8% versus the opening prices at the start of the year. Shanghai Gold Exchange spot gold (Au99.99) and the Shanghai gold main futures contract were up only about 3% from the start-of-year opening prices, and both had at times given back their gains since the beginning of the year.

Gold’s traditional pricing logic faces challenges

Worth noting is that the factors affecting gold prices are becoming increasingly complex, and the traditional gold pricing framework is facing challenges. Liu Xufeng, Chief Analyst for Precious Metals at Qisheng Futures, told a reporter from Shanghai Securities News that in the first quarter of 2026, gold showed a dramatic pattern of first spiking up, then undergoing a deep correction, and then moving into a repair phase; overall, it featured the characteristics of de-leveraging at high levels and a re-pricing of the underlying logic. Specifically:

In the first stage, the factors driving gold higher mainly came from a convergence of risk-averse sentiment. In early January, the U.S. military launched a military strike against Venezuela; this sudden event quickly ignited risk-averse sentiment in the market. At the same time, at the start of 2026, the market widely expected the Federal Reserve to begin an easing cycle within the year. Rate-cut expectations would weaken the U.S. dollar, reducing investors’ opportunity cost of holding non-yielding assets like gold. In addition, central bank gold-buying demand that supports prices over the medium to long term is still there, and it also became a structural support for gold’s rise in January this year.

In the second stage, because gold prices were stuck in consolidation, especially after the Federal Reserve’s policy meeting in the early hours of January 28 Beijing time, the short-term positive catalysts logic had temporarily run its course. Market long funds chose to take profits, and multiple factors combined to trigger gold’s historical plunge: on top of that, speculation about who would be the next chair of the Federal Reserve, as well as a stampede-like selloff caused when leveraged funds were forcibly liquidated due to insufficient margin, among others. Then, as the geopolitical conflict in the Middle East suddenly escalated and risk-averse sentiment in the market heated up again, together with uncertainty around U.S. tariff policies lifting, gold returned to above 5,000 USD per ounce in late February.

A military strike by the U.S. and Israel against Iran on February 28 became the key turning point in gold’s near-term price action. In the third stage, the market once questioned whether the risk-hedging logic of “buying gold in chaotic times” had failed. But in reality, gold’s safe-haven attribute remains; it’s just that, for a time, the core factor dominating gold’s price trend in the short term switched to global real-rate expectations. This is because the escalation of the Middle East geopolitical conflict drove up oil prices, intensifying inflation pressures. In March, major global central banks released hawkish signals, tightening monetary trading across the world, and the market began to reprice. In a high-interest-rate environment, gold’s disadvantage as a non-yielding asset was magnified: the opportunity cost of holding gold rose, funds started to flow out of gold, and gold prices came under pressure. Meanwhile, with gold already having rallied to high levels, some investors had demands to take profits.

Institutions: If oil doesn’t fall, it’s hard for gold to rise

Industry participants generally believe that, in the long run, the logic that supports gold prices still holds, but uncertainty about where the Middle East geopolitical conflict is headed may cause gold to maintain range-bound consolidation in the short term.

Liu Xufeng expects: In the second quarter, gold price action will mainly be characterized by consolidation for base-building and range repair; the main storyline will still revolve around U.S. inflation conditions, the performance of U.S. nonfarm data, and expectations for Federal Reserve policy. If inflation cools moderately and the economy shows signs of slowing, rate-cut expectations could gradually recover, and gold may trade in a relatively strong consolidation; if inflation rises beyond expectations, it may instead show consolidation with downward pressure.

A research report from Zijin Tiangang Futures argues that, in the short term, after the geopolitical conflict in the Middle East leads to a surge in oil prices and the subsequent suppression from a stronger dollar, gold prices are showing a clear pattern of being weighed on. The transmission mechanism of “oil price—U.S. dollar—gold” points to a significant negative correlation between the dollar and gold prices; in other words: if oil doesn’t fall, it’s hard for gold to rise, and the two may not be able to resonate together in the short term. Before there are clear signs of conflict between the U.S., Israel, and Iran, the market may be experiencing an irrational sell-off, and building positions hastily in the short term carries substantial risk.

China International Capital Corporation’s research report also reminds investors not to overestimate the motivation of global central banks to buy gold: “Since 2025, gold has been rising strongly in a one-way move. One common view is that global central banks have been purchasing large amounts of gold out of safe-haven needs. But after the escalation of the Middle East geopolitical conflict, gold price volatility has increased noticeably. In fact, there are many factors that affect gold prices. Under a new macro paradigm, the traditional gold pricing framework faces challenges.”

Liu Yuxuan, a senior research analyst at CSGH Futures for Precious Metals, also believes that central bank gold buying’s impact on gold has arrived at the second stage: from value preservation to value realization. When the conflict truly arrives, Middle Eastern countries have been selling gold one after another to protect their fiscal situation.

For individual investors, Zhen Weigang, chairman of the Guangdong Gold Association, suggests not to use leverage and not to borrow money to chase higher prices; it’s best to build positions steadily in batches. “Taking a long-term approach to treating gold as part of asset allocation is a safer investment method,” he said.

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责任编辑：Zhao Siyuan