How to interpret gold price fluctuations? A comprehensive analysis of the structural drivers in 2026

How to interpret gold price fluctuations? The key isn’t in short-term volatility but in understanding the deep structural factors driving this upward cycle. When the market generally expects these core issues to be resolved or significantly eased, the true decline in gold’s monetary premium will occur. Grasping the fundamental logic behind gold price changes is essential for responding to market fluctuations.

Central Bank Gold Buying Trends: A Barometer of the Global Credit System

According to the World Gold Council (WGC), net gold purchases by central banks worldwide exceeded 1,200 tons in 2025, marking the fourth consecutive year surpassing 1,000 tons. This isn’t a short-term move but a significant signal of a structural shift.

The WGC’s June 2025 report on central bank gold reserves shows that most surveyed central banks (76%) believe their gold holdings will be “moderately or significantly increased” over the next five years. At the same time, most expect the “U.S. dollar reserve ratio” to decline. What does this reflect? Central bank gold purchases represent a long-term skepticism toward the dollar system and are the most direct evidence of cracks in the global credit system.

As central banks worldwide shift toward hard assets, it indicates that the traditional fiat currency credit system is under unprecedented pressure. From 2025 to early 2026, the U.S. fiscal deficit widened, debt ceiling disputes persisted, and the de-dollarization trend accelerated. Capital continues to flow from dollar assets into gold and other hard assets. This isn’t just market sentiment but a long-term systemic change.

Structural Support System for Gold Prices

The factors driving this cycle of rise are not isolated; they reinforce each other, forming multiple layers of support.

Trade Protectionism and Policy Uncertainty

Repeated tariff policies increase market uncertainty, significantly boosting risk aversion. Historically, during the 2018 U.S.-China trade war, gold prices typically surged 5–10% in periods of policy uncertainty. As we approach 2026, the residual effects of tariffs and ongoing regional trade frictions remain key variables supporting gold prices.

Gradual Decline in Confidence in the U.S. Dollar

When market confidence in the dollar wanes, gold priced in dollars tends to benefit, attracting more capital inflows. The de-dollarization trend in 2025–2026 is accelerating this process.

Expectations of Federal Reserve Rate Cuts

Fed rate cuts weaken the dollar, reducing the opportunity cost of holding gold and increasing its attractiveness. If the economy weakens, rate cuts could accelerate. Historically, each rate-cutting cycle has seen substantial gold price increases, such as during 2008–2011 and 2020–2022. Expectations of 1–2 rate cuts in 2026 provide strong support for gold. Monitoring the CME FedWatch tool for rate cut probabilities is an effective way to gauge short-term gold trends.

Long-term 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, these risks persist and are amplified by fragile global supply chains.

Global Debt Pressure and Economic Slowdown

By 2025, global debt reached approximately $307 trillion (IMF data). High debt levels limit countries’ interest rate policy flexibility, likely leading to more accommodative monetary policies, which lower real interest rates and indirectly boost gold’s appeal.

Market Performance and Forecasts for Gold Price Fluctuations

Gold’s performance over the past two years has been remarkable. According to Reuters and Bloomberg data, the gains in 2024–2025 exceeded 30%, the highest in nearly 30 years (surpassing 31% in 2007 and 29% in 2010). As of January 2026, gold continues its upward trend, reaching new highs multiple times and stabilizing above $5,150–$5,200 per ounce.

This cycle has seen gold rise from just over $2,000 in early 2024 to surpass $5,000 in 2026, a cumulative increase of over 150%. From the full year of 2025 into early 2026, gold prices have risen by more than 60%, with no signs of weakening.

Consensus among Institutions and Banks in 2026

Analysts are generally optimistic about the remainder of 2026, expecting further gains driven by the same structural factors that fueled the bull market over the past two years:

• Consensus forecast: Average price of $5,200–$5,600 per ounce in 2026, with year-end targets typically between $5,400–$5,800, and more optimistic estimates reaching $6,000–$6,500.
• Goldman Sachs: Raised year-end target from $5,400 to $5,700, citing ongoing central bank buying and declining real yields.
• J.P. Morgan: Projects reaching $5,550 in Q4, driven by ETF inflows and safe-haven demand.
• Citi: Average second-half price of $5,800, with risks of rising to $6,200 in recession or high-inflation scenarios.
• UBS: Conservative target of $5,300 by year-end but acknowledges that accelerated rate cuts could push prices higher.
• LBMA (London Bullion Market Association): The current annual average price forecast is around $5,450, significantly higher than previous surveys.

Some institutions, including Societe Generale and independent strategists, believe that if geopolitical risks escalate or the dollar depreciates sharply, gold could reach above $6,500.

How to View Gold Price Movements: Risks Investors Need to Understand

A common misconception is that gold has limited downside, so risks are minimal. In reality, gold’s volatility is comparable to stocks. The average annual fluctuation of gold is 19.4%, while the S&P 500’s is only 14.7%.

Gold’s cycles of rise and fall are very long. Even if you buy it as a hedge, on a 10+ year scale, it may appreciate, but within that period, it could double or be halved. In 2025, gold retreated 10–15% due to Fed policy expectations adjustments. If real interest rates rebound or crises ease in 2026, volatility will likely be intense.

For physical gold investors, transaction costs are relatively high, typically between 5% and 20%. For Taiwanese investors, currency fluctuations between USD and TWD can also impact returns.

The key point is that gold’s price movements are never linear. Understanding the structural factors is crucial, but so is preparing psychologically for short-term fluctuations. Systematically monitoring macro signals rather than chasing news is the correct approach to gold investment.

This cycle of gold’s rise is not over, but its strength is rooted in persistent deep structural issues like sticky inflation, debt burdens, and geopolitical tensions. When considering how to interpret gold price movements for investment decisions, understanding these factors is far more important than chasing short-term price surges.