Buckle up! Safe-haven gold enters an era of great volatility

On the morning of February 6th at 8 AM, in a gold shop on Tianyao Bridge Road in Xujiahui, Shanghai, the shop owner Zhao Le was already waiting. He was anticipating a group of special "returning customers"—on February 2nd, he sold 300 grams of investment gold bars to these clients at a price of 1,095 yuan per gram. With gold prices rebounding sharply after an epic drop, this batch of gold bars appreciated by about 40,000 yuan in just two days. Surprised, the customers decisively decided to invest another 300 grams. Zhao Le, who has been in the industry for many years, has never experienced such a crazy gold market. Since 2026, the gold market has shown a roller-coaster trajectory: COMEX gold futures prices have been rising sharply, reaching a historical high of 5,626 USD per ounce on January 29th, with a monthly increase of nearly 30%; the next day, however, gold prices turned downward, plummeting by 9.25%; on February 2nd, gold futures prices continued to decline by 1.35%. Domestic gold futures prices, gold concept stocks, and fund varieties all fell sharply. The market has differentiated amid the massive fluctuations in gold prices: some have taken profits and exited, while others have increased their positions against the trend. Zhao Le noticed that since January 30th, there has been a significant increase in returning customers wanting to buy gold bars, and they are buying more as prices drop. On February 3rd, gold prices staged a "V-shaped" reversal, rising by 6.83%. On February 5th, after COMEX gold futures prices quickly fell from 5,060 USD per ounce to 4,800 USD per ounce, four old customers indicated they would come to buy investment gold bars the next day, with two customers worried about "missing out" on gold bars, paying a 10% deposit in advance. At Beijing Caishikou Department Store, it was crowded with people rushing to buy gold bars and gold jewelry, while long lines formed to sell physical gold. At commercial bank branches, the public's demand for gold investment remains strong. As a wealth management manager at a large state-owned bank branch, Qin Haotian has been particularly busy. Since February, he has received over 30 clients daily, with about 3/4 of them inquiring about gold wealth management products and gold accumulation investment services. As the yields on fixed-term deposits and low-risk bank wealth management products gradually decline, several clients have decided to invest all the funds from their recently matured fixed-income wealth management products into gold wealth management products. "The epic drop in gold prices on January 30th became the catalyst for the public's enthusiasm for gold wealth management," he remarked. Behind the frenzy is a significant change that most people overlook: gold has transformed from a stable "safe haven" in people's minds into a high-volatility "risk game." As a trader at a large Wall Street asset management institution, Yu Hao has over 20 years of investment experience in COMEX gold futures. He found that ten years ago, gold prices hovered between 1,000 USD and 1,500 USD per ounce, and if the daily volatility exceeded 3%, the entire market would be "in an uproar," with traders asking if "something big had happened"; now, with gold prices surpassing 5,000 USD per ounce, the market has become accustomed to daily fluctuations exceeding 5% Data is more persuasive. Since 2025, gold prices have been on a path of continuous new highs, with trading days experiencing average fluctuations exceeding 5% for more than 50 days, far surpassing any previous year. In the last four months, there have been three instances of single-day drops in gold prices exceeding 5%, which is historically rare. The steadily rising prices have transformed gold from a stable safe-haven asset to a high-volatility safe-haven asset, with every market participant stepping into a battlefield of wealth under global capital restructuring and risk reassessment. Gold Prices Plunge, Investment Heats Up Zhao Le particularly "thanks" the gold price plunge on January 30th — it has made his gold shop exceptionally busy. In the past four days, Zhao Le has received 3 to 4 customers almost every hour, with nearly all customers coming to buy gold at the bottom. They are generous, often purchasing investment gold bars weighing 50 grams to 100 grams. In just a few days, Zhao Le found that 20-gram and 50-gram investment gold bars were nearly sold out. On February 5th, he urgently called gold jewelry processing companies for restocking, only to be told that they also had no inventory — the previously unsold investment gold bars had been completely snatched up by downstream gold shops in the past four days. That day, Zhao Le decided to make a "loss" transaction — taking some gold jewelry back to the processing company to be melted down and made into investment gold bars for sale to new and old customers. "There will definitely be some loss in processing fees, but as long as I can win their trust and increase the frequency of repurchases, the business will get better and better," he said. Qin Haotian also has personal experience. In the past, less than 10% of customers would actively inquire about gold financial products, with most customers "disliking" the high gold prices. After the gold price drop on January 30th, some middle-aged and elderly customers were waiting at the bank branch before it opened, eager to subscribe to gold financial products; young customers would come during lunchtime to ask "which gold financial products are worth investing in." During this time, the number of customers consulting him about gold accumulation investment business increased by more than 40% compared to before. Although starting from February 2nd, banks raised the minimum amount for personal gold accumulation business (including average daily accumulation and optional daily accumulation) to 1,500 yuan, there were still customers who directly used hundreds of thousands of yuan from maturing financial products to fully subscribe to gold accumulation. "For this, we also had some unpleasant moments," Qin Haotian said. He reminded customers to pay attention to the investment risks arising from the sharp fluctuations in gold prices and suggested they could participate through regular investment, but unexpectedly, several customers felt he was "cursing." In their eyes, the high volatility of gold prices is merely an "interlude," while the continuous new highs are the "main theme." The gold-buying enthusiasm of Chinese investors has already caught the attention of investment institutions across the ocean. Zhang Gang is a fund manager at a multi-strategy hedge fund on Wall Street with assets exceeding $200 million. Two years ago, he launched a $60 million precious metals investment fund, primarily investing in gold ETFs, COMEX gold and silver futures, and options and other derivatives. On February 3rd, he noticed that several Wall Street fund managers were posting videos or photos on social media showing bustling domestic gold trading markets like Shenzhen Shuibei Market and Beijing Caishikou Department Store, where the public was rushing to buy gold jewelry and gold bars At first, Zhang Gang didn't pay much attention, but when the COMEX gold futures price briefly recovered to $5,000 per ounce that night, he suddenly realized the "deep meaning" behind the actions of these hedge fund managers—China's demand for gold is particularly strong, so how could the gold price not rise? With gold prices experiencing a rapid "V-shaped" rebound since February, Zhang Gang found that many Wall Street fund managers had quickly switched their discussion keywords regarding gold investment from "stop-loss, liquidation" to "bottom-fishing, increasing positions." Over the past two days, Zhang Gang repeatedly had the thought of increasing his gold positions, but one concern held him back—amidst the large fluctuations in gold prices, an epic crash could "repeat itself." On February 5, as the Chicago Mercantile Exchange continued to raise the margin requirements for COMEX gold futures, the gold price quickly fell from $5,000 per ounce to below $4,800 per ounce, prompting Zhang Gang to exclaim: "The large fluctuations in gold prices are back; everyone needs to fasten their seatbelts." Who is Driving the Gold Price "Roller Coaster"? Zhang Gang does not like the "large fluctuations" in gold prices. "It feels quite ironic. Gold suddenly combines price volatility with its safe-haven attributes, which is contradictory. Safe-haven means investment safety, but price volatility often equates to high investment risk," Zhang Gang said. However, he admits that the significant changes in underlying investment logic make the trend of large fluctuations in gold prices difficult to stop. Before 2016, in an environment where economic globalization was continuously advancing, the global status of the dollar was solid, and great power competition had not intensified, global investment institutions viewed gold as a pure safe-haven asset, serving as a cushion in asset allocation, but the allocation ratio would not exceed 5%. After 2016, under the resonance of factors such as the rapid expansion of U.S. debt, the continuous escalation of international geopolitical risks, Western countries freezing Russian foreign exchange reserves exacerbating the global status of the dollar, the acceleration of global monetary system reform, and the rise of global trade protectionism, the importance of gold in asset allocation has significantly increased—its role is not only as a safe-haven asset but also as a key tool for coping with uncertainty and diversifying investments. Global central banks, sovereign wealth funds, large asset management institutions, and various funds have all significantly increased their gold asset allocations, directly raising the gold allocation ratio to 15%-20%, with some family offices allocating over 30% of their funds to gold. In June 2025, the European Central Bank released its annual report on "The International Status of the Euro," indicating that the proportion of gold in foreign exchange reserves of various countries has significantly increased, with gold accounting for 20% of global reserve assets in 2024, surpassing the euro (16%) and only lower than the dollar (46%), becoming the second-largest reserve asset globally. By the end of 2024, global central banks held gold reserves of 36,000 tons, close to the historical high level during the Bretton Woods system after World War II. The increase in holdings by global central banks and other large funds is viewed by financial markets as a key driver of rising gold prices. Goldman Sachs believes that the shift of global central banks from dollars to precious metals has fundamentally changed the demand structure of the gold market. Unlike the stock or fixed income markets, the gold market is relatively small, which means that even a moderate increase in global central bank gold allocation demand can have a huge impact on gold prices The strong demand for gold allocation brought about by the sudden change in the underlying investment logic of gold prices and the continuous rise in gold prices has invisibly driven the volatility of gold prices to expand. Yu Hao said that ten years ago, the average annual increase in gold prices was less than 7%, with a corresponding annualized price volatility of less than 12%. However, from 2023 to 2025, a large amount of capital flowed into the gold market, pushing gold prices to new highs, resulting in annual increases of 13.2%, 26%, and 62.7%, while also driving annualized price volatility to exceed 30%, 60%, and 95%. Especially after gold prices surpassed $4,000 per ounce, the number of trading days with a single-day fluctuation of more than 5% doubled compared to ten years ago. On January 30, 2026, the "most hawkish" Kevin Warsh was nominated to be the next chairman of the Federal Reserve, leading to increased concerns in the financial markets about the uncertainty of future Federal Reserve monetary policy, resulting in an epic drop in gold prices. Under Currents Amidst Frenzy Wall Street has already felt the negative impact brought by the large fluctuations in gold prices. In November 2025, Zhang Gang invested millions of dollars to double down on the ProShares Gold ETF (UGL), originally intending to leverage the continuous new highs in gold prices to seek excess high returns. On January 30, the maximum intraday drop in COMEX gold futures reached 12.2%, resulting in a significant loss for Zhang Gang's investment, dragging down the net asset value of the precious metals investment fund he managed by more than 8% in a single day. Subsequently, he quickly removed the double long gold ETF from his investment scope, not wanting to repeat the scenario of severe declines in gold prices—where the fund's net asset value fell beyond expectations. In China, many investors are experiencing the "cruelty" of gold price fluctuations in another way. In January, the precious metals platform of Shenzhen Jie Wo Rui Jewelry Co., Ltd. (hereinafter referred to as "Jie Wo Rui Jewelry") in the Shenzhen Shui Bei market encountered withdrawal difficulties. This also brought to light the pricing trading model that has long been popular in the Shenzhen Shui Bei market. This model allows investors to invest a margin of 20 to 30 yuan to profit from betting on the rise and fall of 1 gram of gold (corresponding to 1,000 yuan/gram), which is essentially a highly leveraged underground gold counter-trading. Once gold prices experience severe fluctuations, investors who misjudge the price trend can lose all their capital in a very short time. A gold material dealer in the Shui Bei area revealed to reporters that before Jie Wo Rui Jewelry encountered operational turmoil, this type of pricing trading model was all the rage in the Shui Bei area, with many investors and small to medium-sized gold recycling merchants participating in it with dreams of "getting rich overnight." Whenever the daily fluctuation of gold prices exceeds 3%, he often hears stories of investors facing liquidation. He also frequently reminds friends who are preparing to enter the market—"High leverage + high volatility in gold prices, liquidation is inevitable." After the significant drop in gold prices on January 30, he heard even more stories of investors facing liquidation. Their common characteristic was that they used 30 to 50 times leverage through underground pricing trading in late January, betting that gold prices would break through $5,800 per ounce in the short term. However, the plummet in gold prices wiped out all their principal Fasten Your Seatbelt At the beginning of February, Zhang Gang was determined to solve a tricky problem—how to predict the next significant drop in gold prices in the face of large fluctuations. He identified four instances in the past 10 years where gold prices experienced a single-day maximum drop of over 5%—August 19, 2020; October 21, 2025; December 29, 2025; and January 30, 2026, with maximum intraday drops of 6.17%, 6.42%, 5.39%, and 12.2%, and closing drops of 5.67%, 5.38%, 4.65%, and 8.35%, respectively. He found that on the trading day before each of these significant drops, gold prices had reached a historical high at that time, and the gold investment market exhibited a highly bubble-like investment atmosphere. For example, the number of open contracts in the COMEX gold futures market, the volume of gold call options purchased, and the leverage ratios of investment institutions chasing gold all reached peak levels at that time; a Bank of America fund manager survey indicated that buying gold was the most crowded trade in the financial market at that time. He incorporated these insights into a risk control model for gold investment—whenever the risk control model identifies a highly bubble-like investment atmosphere in the gold investment market based on these market signals, it will issue a warning signal. Upon receiving the signal, Zhang Gang would quickly reduce his long gold positions by 50% to hedge against risks. However, relying solely on the selection of investment tools to cope with the high volatility risk of gold prices is not enough. As many financial institutions continue to be bullish on gold prices, greater volatility may be on the horizon for gold. On February 2, UBS Wealth Management's Chief Investment Office (CIO) stated that despite a significant drop in gold prices at the end of January, concerns about the independence of the Federal Reserve, geopolitical tensions, and policy instability may continue to favor gold's subsequent performance. UBS Wealth Management raised its gold price target for the first three quarters of 2026 to $6,200 per ounce, significantly up from the previous target of $5,000 per ounce. On February 3, Gregory C. Shearer, Head of Base and Precious Metals Strategy Research at JP Morgan, predicted that the diversified allocation demand from central banks and investors would remain robust this year, enough to push gold prices to $6,300 per ounce by the end of 2026, and further up to $6,600 per ounce in 2027. Yu Hao bluntly stated that once gold prices break through $6,000 per ounce, it will inevitably attract more capital into the gold market, leading to further increases in gold volatility. When the high volatility of gold outweighs its safe-haven attributes, gold may become a risk asset "dressed in safe-haven clothing." In his view, for investors to maintain stability and longevity in a high-volatility gold price environment, the key lies in restraining their inner greed and impulse, avoiding blind chasing of price increases and the use of high leverage investments, as well as implementing necessary position controls. Some large investment institutions on Wall Street have changed their gold allocation strategies. Ten years ago, when they increased their gold asset allocations, they rarely considered hedging against the risk of severe price fluctuations through gold futures, options, and other derivatives. However, after this year's gold prices surged past $5,000 per ounce and faced an epic drop, they now require that for every 1 percentage point increase in gold allocation, they first ensure price risk hedging for the newly added gold positions As a gold shop owner, Zhao Le found that the vast majority of investors in gold bars do not use leverage and are only concerned about whether gold prices can continue to rise during significant fluctuations. In the past two days, there has been a noticeable increase in the number of people in Zhao's gold shop exchanging gold jewelry purchased in previous years for cash. This may also be a simple way for some individuals to hedge against risks amid the current volatility in gold prices. Risk Warning and Disclaimer The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk