Gold’s most volatile quarter in modern memory is not a sign of instability but a symptom of structural transformation that could result in higher prices, according to WisdomTree head of commodities and macroeconomic research Nitesh Shah.
The yellow metal hit an all-time intraday high of almost $5,600 per ounce on 30 January 2026, after its largest monthly gain since September 1999, before reversing to an intraday low of $4,402/oz within days. By 23 March, prices had fallen further to around $4,100/oz, but then rebounded above $4,600/oz within a week.
“We have rarely observed such pronounced volatility in the gold market as in the first quarter of 2026,” Shah said.
Performance of gold over 2026 to date
Source: FE Analytics. Total return in US dollars between 1 Jan and 8 May 2026
However, WisdomTree’s thesis is that this volatility reflects something more significant than short-term turbulence, with Shah arguing gold is “in the process of transitioning towards a new, higher, steady state, driven by a broadening investor base”.
Chinese insurance companies and Indian pension funds have entered the market in recent years and gold ETF inflows in both countries have grown significantly over the past year.
Digital asset issuers have also become notable buyers. Tether provides the clearest illustration of this shift: WisdomTree estimates the stablecoin issuer bought between 60 and 70 tonnes of gold during 2025, which puts it alongside some of the world’s largest official-sector buyers, including Kazakhstan, Azerbaijan’s sovereign wealth fund and Turkey.
These newer participants act as ‘amplification agents’, according to WisdomTree, potentially exaggerating price moves in both directions. Shah suggested this contributed to January’s outsized rally, which he described as excessive in magnitude even if directionally justified.
One of the most counterintuitive episodes of 2026’s first quarter was gold’s behaviour when the US/Israel-Iran conflict broke out in February. Prices fell rather than rose, despite the metal’s traditional role as a geopolitical hedge.
Shah attributed this to a well-documented pattern: gold often records an initial negative reaction to geopolitical shocks before ultimately moving higher.
“The mechanics are relatively consistent. A geopolitical shock tends to trigger sharp declines in risk assets such as equities. This, in turn, generates margin calls, forcing investors to raise liquidity quickly. Gold, as a highly liquid and cash-like asset, is often sold to meet these obligations,” he explained.
“This creates temporary downward pressure on prices. It’s important to note that the amplitude and duration of the drawdown and subsequent recovery are never the same and clearly depend on what else is influencing gold at the time.”
WisdomTree cited multiple historical precedents, including the 9/11 attacks, the dot-com crash, Black Monday in 1987 and the Russia-Ukraine war. In the current episode, additional selling pressure likely emerged from households in affected Middle Eastern regions liquidating gold to fund urgent expenditures.
Central banks are not immune to this dynamic. Turkey mobilised approximately 58 to 60 tonnes of gold within two weeks to support the Turkish lira, using a combination of outright sales and swaps.
Shah said this should not be taken as a rejection of gold during a crisis but as further proof of its role as a trusted reserve asset, noting that Turkey rebuilt its reserves in the months following significant gold sales in 2023.
“Crucially, this type of selling should not be interpreted as a loss of confidence in gold. Rather, it reflects gold’s role as a source of liquidity in times of stress,” he said. “Historically, once these forced-selling dynamics subside, gold prices tend to recover and move higher as the underlying geopolitical risk premium becomes the dominant driver.”
By late March, gold had begun to trend higher again despite a stronger US dollar, elevated bond yields and reduced expectations of Federal Reserve rate cuts – all of which are traditional headwinds for the gold price.
The fact that these factors did not push prices down pointed to a powerful underlying tailwind, which Shah identified as elevated geopolitical risk becoming a structural rather than transient feature of the market.
Two additional factors underpin WisdomTree’s view that gold will remain well supported over the coming year.
The first is Federal Reserve uncertainty. The nomination of Kevin Warsh as Fed chair candidate in late January reduced immediate concerns about political interference in monetary policy and the Department of Justice’s decision to end its criminal probe of current chair Jerome Powell put Warsh’s confirmation on firmer ground.
However, some uncertainty remains over Powell's plans to continue as a Fed governor and whether further nominations from US president Donald Trump could extend political influence over the board. A Supreme Court ruling on the attempted removal of Fed governor Lisa Cook was also pending at the time of writing, with a decision expected by mid-2026.
The second is fiscal pressure. The Supreme Court’s February ruling against using the International Emergency Economic Powers Act (IEEPA) for tariffs reduced expected tariff revenues, while tax cuts, fiscal expansion and rising military expenditure pointed to a widening US deficit and an elevated term premium on treasuries. Shah argued this environment favoured gold, noting that the historically inverse relationship between gold and bond yields had continued to weaken in recent years.
WisdomTree gave three price scenarios for the year ahead, with Shah explicit that all three should be treated as a lower bound.
Under the consensus scenario, gold rises to $5,493/oz by 2027’s first quarter, driven by improving sentiment and inflation running at 2.8%. This would represent a new all-time high on a closing-price basis, given that January’s intraday spike to $5,600/oz was only briefly sustained.
In the bull scenario, inflation rises to 4%, driven by the energy crisis, supply chain disruption and fiscal expansion. With the Federal Reserve refraining from tightening, the US dollar falling a further 7% and higher speculative positioning, gold reaches $5,872/oz.
“If inflation rises towards 4% while the Fed refrains from tightening policy, the central bank may face accusations of policy error or political capitulation. In such a scenario, gold sentiment is likely to strengthen significantly, as the metal is increasingly viewed as a hedge against fiat currency debasement,” Shah noted.
The bear scenario, which Shah described as the least likely outcome, sees the Fed successfully return inflation to its 2% target. Higher policy rates drive significant dollar appreciation, speculative positioning collapses and gold retreats to $4,634/oz, broadly returning to levels seen at the start of 2026.
“For long-term investors, periods of volatility may therefore present opportunities rather than risks,” Shah said.
“Gold has experienced a highly volatile start to 2026. The expansion of the investor base is likely contributing to a transition towards a higher steady state.”