Gold’s Record Rally Stalls as Volatility Returns

Gold XC0009655157

The gold market experienced a dramatic shift in momentum at the end of January 2025. After posting its strongest monthly gain in over four decades—a surge of approximately 24%—the precious metal’s record-breaking ascent came to a sudden halt. Prices plummeted over 5% in a single Friday session, retreating from an all-time peak above $5,550 per ounce. This sharp reversal has market participants questioning the drivers behind the unprecedented rally and assessing its longevity.

The rally culminated on Thursday, January 28th, with spot gold reaching a record $5,594.82 per ounce. However, this peak was short-lived. A swift correction ensued, dragging the price down to $5,109.62 within a day as investors moved to lock in profits. Despite this pullback, the scale of the January advance remains historic, marking the metal's most significant monthly performance since the 1980s. Several major institutions, including UBS, have revised their outlooks upward, with the bank now targeting a price of $6,200.

Structural Demand Provides a Firm Foundation

Beneath the recent price volatility, analysts point to powerful structural forces supporting the market. Central bank purchasing has emerged as a dominant theme. According to estimates from Goldman Sachs, official institutions are currently buying around 60 tonnes of gold per month, a rate more than triple the average seen prior to 2022. Ryan McIntyre of Sprott Inc. notes this trend reflects a strategic shift as banks diversify foreign exchange reserves and decrease reliance on the US dollar.

Simultaneously, private investment has flooded into the sector. Holdings in Western-listed gold-backed exchange-traded funds (ETFs) have expanded by roughly 500 tonnes since the start of 2025. European gold ETFs alone attracted over €2 billion in inflows during 2026.

Monetary Policy and Geopolitics Fuel Uncertainty

The US Federal Reserve's recent decision to hold its benchmark interest rate steady in a range of 3.50% to 3.75% contained an unusual dissent. Two Fed Governors, Christopher Waller and Stephen Miran, voted for an immediate 25-basis-point cut. This divergence in views introduces uncertainty, compounded by the impending end of Chair Jerome Powell's term in May. President Donald Trump is expected to announce his nominee for the Fed chairmanship, with former Governor Kevin Warsh considered a frontrunner. The potential for a shift in monetary policy philosophy is creating short-term headwinds for gold, yet concerns over the central bank's future independence are simultaneously boosting its safe-haven appeal.

Geopolitical friction continues to underpin demand. A weakening US dollar, which hit a four-year low, prompted a rare "rate check" by the New York Fed with currency traders—a move often seen as a precursor to potential intervention. Ongoing trade tensions, including new tariff threats against Canada and South Korea, alongside heightened military posturing in regions from Greenland to the Middle East and Ukraine, are sustaining a robust level of risk aversion in markets.

Sister Metals Outperform

Gold's rally has been mirrored—and in some cases exceeded—by other precious metals. Silver prices skyrocketed more than 60% in January, reaching $121.64 per ounce. Citi has raised its short-term forecast to $150, while Bank of America suggests a move to $170 is plausible. Platinum also climbed to a record high of $2,918.80. Analysts at Standard Chartered, however, caution that silver may be due for a near-term correction.

Outlook: Elevated Volatility with a Bullish Undertone

Market observers describe the precious metals surge as having developed a momentum of its own. Peter Grant of Zaner Metals stated that while gold appears overbought, substantial buying interest during dips continues to support the upward trend. The immediate direction is likely to be influenced by the upcoming Fed nomination. Looking further ahead, structural factors including sustained central bank accumulation, de-dollarization trends, and persistent geopolitical risks are expected to continue driving prices. Major banks like UBS, Deutsche Bank, and Societe Generale anticipate gold trading around $6,000 by year-end.

@ boerse-global.de | XC0009655157 GOLD’S