Gold prices fluctuate at high levels: how to understand the logic and risks of gold investment?

Gold ETF—Bosera Fund Manager Wang Xiang

1． How should we view the overall landscape of the current gold market?

Wang Xiang: The current gold market is in a complex stage where trading difficulty has risen significantly, but the medium- to long-term logic has not changed. Since the fourth quarter of 2025, gold’s 60-day rolling volatility has surged to around 40%, far exceeding historical levels; the asset’s characteristics have shifted to “high-volatility” range-bound fluctuations. Gold prices are no longer priced purely based on foreign-exchange reserve diversification or interest-rate logic, but are instead affected by a combination of multiple factors, including excess liquidity, geopolitical games, and central bank gold purchases. This means investors need to be more cautious, avoid blindly chasing rallies at high levels, adopt a calm medium- to long-term perspective, and use market adjustment opportunities to enter in batches. (Data source: wind; statistical period: 2025-10-01 to 2026-03-22)

2． What are the core factors driving gold price volatility in 2026?

Wang Xiang: The current gold price is the result of composite pricing. Its core driving forces mainly include marginal changes in liquidity, central bank gold buying, geopolitical and inflation expectations, as well as a transformed real interest-rate framework. In the short term, the degree of global liquidity availability and where it flows are very important for gold prices—especially in a high-volatility environment, where liquidity contraction may trigger rapid pullbacks. At the same time, global central banks may have become highly influential marginal price setters, and their large, sustained net purchases of gold in recent years have profoundly altered the traditional balance of supply and demand. In addition, geopolitical events such as the conflict between Iran and the United States raise expectations for imported inflation, and the rise in the inflation center is an important fundamental supporting gold prices. Although real interest rates are still an important reference, because central banks intervene, gold’s sensitivity to upward movements in interest rates is reduced, showing asymmetry. These factors together form the driving logic behind the current gold price.

3． Does the traditional negative correlation between gold and U.S. dollar real interest rates still hold?

Wang Xiang: The traditional framework has not failed, but its manifestation has undergone structural change. Data show that around turning points in real interest rates, the timing of gold’s rise and fall still maintains roughly an 80% correlation with them. However, since the second half of 2022, due to large-scale central bank gold accumulation, this relationship has become non-symmetric. When real interest rates fall, gold’s upside is amplified; when real interest rates rise, gold’s downside is buffered by central bank support, causing the correlation to appear to disappear when viewed from the data ex post. In 2026, if the Federal Reserve’s policy stance becomes more conservative, the “resonance” effect between real interest rates and central bank gold buying may weaken, leading to gold’s upward momentum potentially being less strong than in 2025. Therefore, investors should not treat real interest rates as a single pricing factor; instead, they should regard them as a component that works in concert with other factors to form a combined force. (Data source: wind)

4． What is the core logic behind central banks’ continued accumulation of gold?

Wang Xiang: The core logic of central bank gold buying is to diversify risk and move away from the U.S. dollar. The share of gold in emerging economies’ foreign-exchange reserves is still low—far below that of developed countries—leaving large room for further accumulation to withstand credit risks related to the U.S. dollar. Against the backdrop of global supply chain decoupling and intensifying geopolitical conflict, resource countries and manufacturing countries tend to reshape pricing power by holding physical assets, reducing reliance on U.S. Treasuries. Although high gold prices may cause some central banks to slow their pace of accumulation in the short term, as long as geopolitical games have not eased, the long-term accumulation trend will remain unchanged—possibly even with more former partner countries joining the “reduce U.S. Treasuries and increase gold” ranks. This is because central bank gold buying is not for speculative trading; it is to smooth their own balance sheets and respond to uncertainty.

5． In the context of geopolitical conflicts, is gold’s safe-haven attribute or its anti-inflation attribute more prominent?

Wang Xiang: In the short term, the dominant factor is liquidity disruption; in the medium to long term, the anti-inflation attribute may be the main support. At the initial stage of a geopolitical conflict breaking out, if it triggers severe volatility in global equity markets, institutions may sell gold—which has better liquidity—to replenish margin, causing a short-term divergence where gold prices show a “fall despite no rise.” However, from a medium- to long-term perspective, higher shipping and insurance costs caused by the conflict, along with supply-chain restructuring, may push up the global inflation center. With the Federal Reserve’s scope for rate hikes constrained by the interest-cost burden of massive debt, “inflation rising while rate hikes are constrained” may lead to weaker real interest rates, thereby strongly supporting gold prices. It is expected that in the second half of 2026, as the market cools down, the anti-inflation logic may replace the short-term liquidity-based game and become the core factor driving gold price movements.

6． What actionable leading or concurrent indicators can investors use to observe the gold market?

Wang Xiang: I suggest investors focus on volatility indicators, deviations in money supply, and percentile ranks of rolling returns to assist decision-making. Specifically, investors can compare realized volatility with implied volatility. If realized volatility is significantly higher than implied volatility, it indicates that short-term market risk has been released excessively, and there may be pullback or reversal risks. At the same time, tracking the degree of deviation between the gold price increase and the global M2 money supply growth is also crucial. If gold’s short-term increase far exceeds the rate of M2 growth, it signals the risk of an overbought rally; if it lags behind the pace of monetary expansion, there may be opportunities that are being underestimated. In addition, observing the percentile ranks of stage-by-stage rolling returns in history can help investors avoid chasing at historical extreme levels blindly, thereby striving for returns while mitigating risk.

7． What role should gold play in household asset allocation, and how should the allocation ratio be considered?

Wang Xiang: Gold has a low correlation with stock assets, and in extreme risk events it shows a negative correlation with stocks, which is expected to smooth portfolio volatility and improve the risk-return ratio. Given the current high-volatility environment, it is recommended that the allocation core be set at around 10%. For conservative investors, maintaining a 10% long-term holding at the core is sufficient, without frequent tactical switching; for aggressive investors, based on the 10% allocation core, they may increase allocations appropriately during short-term large pullbacks and reduce exposure moderately during sharp rallies, but they must absolutely prohibit high-leverage speculation.

8． What risks are mainly faced when investing in gold?

Wang Xiang: Investing in gold mainly involves market price volatility risk. Given the current extreme volatility in gold prices, investors need to be mentally prepared to withstand large fluctuations. Compared with smaller varieties such as silver, the gold market has a larger capacity and stronger ability to absorb demand, so liquidity risk is relatively controllable. Therefore, the biggest risk comes from investors treating gold as a short-term speculative tool—using high leverage or chasing after rises and selling after falls at high levels—which leads to permanent loss of principal, rather than liquidity drying up in the market itself.

9． For short-term trading investors, what special suggestions or warnings are there?

Wang Xiang: The threshold for short-term trading is extremely high, so ordinary investors should try to avoid it. Because ordinary investors are far inferior to institutions in terms of the speed of data acquisition and information feedback, they are positioned at the end of the trading chain and find it difficult to grasp short-term volatility patterns; blind participation often leads to losses. If investors still need to participate in short-term volatility, they must use low leverage or no-leverage investment instruments, and use derivatives such as gold futures prudently and carefully in relation to high leverage. Investing in gold should be based on medium- to long-term logic, follow asset allocation discipline, and avoid frequent trading driven by short-term sentiment fluctuations. Only by returning to the original intent and adhering to rational judgment can investors avoid the predicament of “missing the upside” or “getting trapped.”

Note: Index-related information comes from the index compilers; for details, please refer to the information published by the index compiling company. Subsequent changes may occur.

Specific risk warning: Gold has seen relatively large fluctuations recently. Investors who invest in gold funds need to fully understand the risks, make prudent decisions in light of their own risk tolerance. At the same time, they may continue to monitor global macroeconomic trends, central bank gold-buying conditions, geopolitical situations, and related developments.

Risk warning 1: The above information is only for investor education and does not constitute any investment advice. Investors should not use such information to replace their own independent judgment or make decisions solely based on it. All information cited in this content comes from publicly available sources. We strive to ensure accuracy, but we do not guarantee that the information is accurate or complete, and we do not assume any responsibility for losses that may be caused by the use of this information. Without authorization, it is prohibited for any third-party institution or individual to disseminate or edit for commercial purposes in any form.

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Editor-in-charge: Chang Fuqiang