Q2 Gold Price Outlook: How Long Will the Volatility Continue?

How AI · How Traditional Pricing Logic Behind Gold Price Volatility Is Being Disrupted?

Reaching a historic high of $5,600 per ounce, with a single-day volatility exceeding 10%, pricing logic switching back and forth… Looking back at the first quarter of 2026, the gold market experienced a rare “rollercoaster” trend, with March’s “continuous decline” once erasing all gains since the beginning of the year, and by the last day of the quarter, gold prices rapidly rebounded. On April 1, London spot gold continued its upward trend, returning above $4,700 per ounce.

Looking ahead to the second quarter, experts believe that in the short term, the price of gold is under significant pressure due to the strengthening dollar following the surge in oil prices caused by escalating Middle East geopolitical conflicts. The trend of gold prices in the second quarter will mainly be characterized by oscillations, bottoming out, and range correction. Additionally, do not overestimate the motivation of global central banks to buy gold.

From the peak in history to nearly giving back the year’s gains

In the first quarter of 2026, the high-priced gold experienced a “rollercoaster” pattern from a rapid rise to a sharp decline.

Taking London spot gold as an example, the gold price trend in the first quarter of 2026 can be divided into three stages: the first stage from early January to January 28, with prices rising all the way, approaching a record high of $5,600 per ounce; the second stage from January 29 to March 2, with huge fluctuations, including a intraday drop of over 9% on January 30, and the lowest price during the day falling below $4,400 per ounce, then on March 2, briefly rising above $5,400 per ounce; the third stage from March 3 to the end of March, with prices trending downward, once falling below $4,100 per ounce.

Wind data shows that as of 3:00 PM Beijing time on March 31, both London spot gold and COMEX (New York Mercantile Exchange) gold futures had increased by only about 8% from the beginning of the year, while Shanghai Gold Exchange spot gold (Au99.99) and the main contract of Shanghai Gold had risen by only about 3%, both once giving back the gains since the start of the year.

Traditional Gold Pricing Logic Faces Challenges

It is worth noting that the influencing factors of gold prices are becoming more complex, and the traditional pricing framework for gold is facing challenges. Liu Xufeng, Chief Analyst of Precious Metals at Qisheng Futures, told Shanghai Securities News that in the first quarter of 2026, gold showed a pattern of initial surge, deep correction, and subsequent recovery, with overall characteristics of high-leverage de-leveraging and logical re-pricing. Specifically:

In the first phase, the main drivers of the gold price increase were risk aversion sentiment. In early January, the U.S. military launched a military strike against Venezuela, which quickly ignited market risk aversion. At the same time, markets generally expected the Federal Reserve to start a rate-cutting cycle within the year. The expectation of rate cuts would weaken the dollar and reduce the opportunity cost for investors holding interest-free assets like gold. Moreover, the demand from central banks for gold purchases, which has been supporting prices mid- to long-term, also became a structural support for the rise in gold prices in January.

In the second phase, as gold prices entered a period of oscillation, especially after the Federal Reserve’s policy meeting in the early morning of January 28 Beijing time, short-term bullish logic temporarily exhausted, and market bullish funds chose to take profits. Coupled with speculation about the next Fed chair and forced liquidations of leveraged positions due to margin calls, this triggered a historic plunge in gold prices. Later, with the sudden escalation of Middle East geopolitical conflicts, risk aversion sentiment reignited, and combined with uncertainties around U.S. tariffs, gold prices rebounded above $5,000 per ounce in late February.

The event of the U.S. and Israel launching military strikes against Iran on February 28 became a key turning point for short-term gold price movements. In the third phase, the market once doubted whether the safe-haven logic of “buying gold in chaotic times” was failing. However, in reality, the safe-haven attribute of gold still persisted; the core factor dominating gold price trends temporarily shifted to expectations of global real interest rates. This was driven by the escalation of Middle East conflicts pushing oil prices higher, intensifying inflationary pressures. Major central banks signaled a hawkish stance in March, tightening monetary policy globally, and markets began to reprice. In a high-interest-rate environment, the disadvantages of gold as a non-interest-bearing asset were magnified, increasing the opportunity cost of holding gold, leading to capital outflows from gold and downward pressure on prices. Additionally, with gold already at high levels, some investors had profit-taking needs.

Institutions: Oil prices stay high, gold prices struggle to rise

Industry insiders generally believe that the long-term logic supporting gold prices remains, but the uncertainty surrounding the direction of Middle East conflicts may cause gold to remain range-bound in the short term.

Liu Xufeng predicts: In the second quarter, gold prices will mainly oscillate and bottom out, with range correction as the main theme, focusing on U.S. inflation, non-farm payroll data, and Federal Reserve policy expectations. If inflation moderates gradually and economic cooling signals emerge, the expectation of rate cuts may gradually recover, and gold could fluctuate strongly; if inflation exceeds expectations, prices may face pressure within the range.

Zijin Tianfeng Futures research report states that in the short term, after oil prices surged due to Middle East geopolitical conflicts and the dollar strengthened, gold prices faced clear downward pressure. The “oil price–dollar–gold” transmission mechanism indicates a significant negative correlation between the dollar and gold prices, meaning: if oil prices do not fall, gold prices are unlikely to rise, and the two are difficult to resonate in the short term. Before clear signs of U.S.-Israel-Iran conflict, the market might be experiencing an irrational decline, and short-term risky positioning is relatively high.

CICC research also warns not to overestimate the motivation of global central banks to buy gold: “Since 2025, gold prices have been rising steadily, with a common view that global central banks have been buying heavily for risk hedging. However, after the escalation of Middle East conflicts, gold price volatility has increased significantly. In fact, many factors influence gold prices. Under the new macro paradigm, the traditional gold pricing framework faces challenges.”

Guotai Haitong Futures senior precious metals researcher Liu Yuxuan also believes that the impact of central bank gold purchases has entered a second stage: from a store of value to a realization of value. When conflicts truly erupt, Middle Eastern countries tend to sell off gold to protect their fiscal health.

For individual investors, Zhen Weigang, President of Guangdong Gold Association, recommends avoiding leverage and borrowing to chase high prices, and suggests building positions gradually and steadily. “Using a long-term perspective to include gold as part of asset allocation is a safer investment approach,” he said.